How the Rich Are Getting Richer

rich

Have you ever wondered why the rich are getting richer? Or how they’re able to pay very little in taxes compared to how much they make?

Sure, they use some tricks that you already know about such as writing off all of their expenses like their cell phone bills or claiming part of their home as office use…but none of those small tricks really save them that much money.

The way the rich are actually growing their wealth is through a handful of tax saving shelters…which I’ll describe below in a bit. Now, many of these methods may seem illegal, but if you happen to ask a lawyer, I bet they’ll say that they are 100% legal.

Here’s why the rich are getting richer:

Captive Insurance company

Insurance is something you already have. But did you know that you could own your own insurance company? Any business that has a risk of losing money can be classified as an insurance company.

What the rich are doing is setting up their own insurance companies, which is called a captive insurance company or 831b.

They are having their shares and ownership of their corporation transferred to the insurance company. Then when they get their monthly or quarterly check, they push that money into the insurance company instead of directing it into their personal bank account.

What you can do with the insurance company is to take that pre-tax money and invest it into things like real estate, stocks, bonds, and even privately held corporations. If you were to do it, to ensure that you aren’t throwing off red flags to the government, you would be investing first in safer things like real estate and with time in riskier ideas.

If this doesn’t seem like a big deal to you, just imagine pushing $1,000,000 into your life insurance company. And then imagine taking that million and investing it in a hedge fund that is producing 20% returns per year.

Here’s what that $1,000,000 would turn into after ten years:

  • Year 1: $1,200,000
  • Year 2: $1,440,000
  • Year 3: $1,728,000
  • Year 4: $2,073,600
  • Year 5: $2,488,320
  • Year 6: $2,985,984
  • Year 7: $3,583,181
  • Year 8: $4,299,817
  • Year 9: $5,159,780
  • Year 10: $6,191,736

At the end of ten years, if you decide to pull the money out of the captive insurance company, you would be charged capital gains tax rate of 20%. Plus, if you lived in a state like California, you would be charged 13% for state income tax. That means you would be left with $4,148,463.

On the other hand, if you didn’t have a captive insurance company and you invested $1,000,000 in a hedge fund that produced a return of 20% a year, you would have to pay normal short-term tax gains of 39.6% each year. Assuming you lived in a state like California, you would also have to pay 13% in state income tax.

Here’s what you would be left with at the end of ten years:

  • Year 1: $1,094,800
  • Year 2: $1,198,587
  • Year 3: $1,312,213
  • Year 4: $1,426,610
  • Year 5: $1,572,801
  • Year 6: $1,721,903
  • Year 7: $1,885,139
  • Year 8: $2,063,850
  • Year 9: $2,259,502
  • Year 10: $2,473,704

As you can see, $4,148,463 is greater than $2,473,704. Now, just imagine if you did that with $10,000,000 or even $100,000,000. The difference really starts adding up when you deal with larger amounts.

Roth IRA

The beautiful part about IRAs is that you can put money in them and save money on taxes, right? Although that’s true, the rich usually avoid traditional IRAs.

Most people put money in IRAs because they assume that when they get older, they won’t make as much money and, as a result, will move to a lower tax bracket. They expect, when they take the money out upon retirement, to pay less tax.

The rich avoid that because history has shown that the government continually raises taxes over time. Also, if you have a lot of money now, chances are you’ll continue to have it in the future.

So, what the rich do is they use a Roth IRA, in which they pay taxes on their money before they put in it. If the IRA happens to grow over 10, 20 or 30 years, they can then pull the money out and not have to pay any taxes on the gains. This strategy is extremely popular with early employees of PayPal. Many of them are using their IRA cash to invest in startups. Once they happen to sell their investements for a billion bucks, they don’t have to pay taxes on the gains.

Tax free corporation

Did you know that the government has a tax incentive for so-called C-corporations? If you setup a C-corporation this year and hold it for at least five years, you don’t have to pay any federal taxes up to $10 million when your company sells.

And if you happen to raise $5 million, you don’t have to pay taxes up to $50 million…assuming you hold it for over five years.

Many people already know about this, but what rich people are doing is setting up multiple C-corporations even if they don’t have a “company” yet. They are just setting up shell companies, and when they have something that produces money, they move it over to these C-corporations so that when they sell it, they don’t have to pay taxes on the first ten million dollars.

Granted, if the company makes money each year, you’ll have to pay taxes on that income, but you don’t have to pay taxes when you sell the business for a large lump sum.

No state income tax

This is one of the most common ways the rich save on taxes…they move to a state with no state income tax. I did it myself around four years ago, when I moved to Washington State and saved a decent chunk of change. Funny enough, I didn’t move to save on state income tax, I moved so I could be closer to a few of my mentors.

When I used to live in California, I used to pay 10% state income tax…since then it’s risen to 13%. In the state of Washington, I pay 0%. Nevada, Florida, Texas, Alaska and South Dakota are other states that have no state income tax.

There’s nothing wrong with living in a tax-free state, but I’ve been noticing lately that rich people are starting to abuse it. Some people “claim” to live in a state with no income tax, but they aren’t really living there. This is mainly happening with people from Southern California as Nevada is a quick four-hour drive.

What they’ll do is buy a home in Las Vegas, switch their driver licenses to Nevada’s and claim they are living there. They’ll then turn their California home as their secondary residence or vacation home…and avoid using credit cards while in California in case they get audited.

To make it seem legitimate, they give one of their credit cards to a friend who lives in Nevada and have them spend a few hundred bucks every month in Las Vegas to make it seem like they are actually living there when they really aren’t.

Invest in gold

The economy may seem like it’s going up, but you already know that it’s artificially inflated. Things seem to be getting better, but the US government is in more debt than it ever has been before, and one day they’ll have to pay it off.

The rich are worried about inflation or devaluation of the dollar. The best way you can protect your assets against the above scenarios is to switch a portion of your cash into gold. Why? It’s because there is only 3.2 Olympic size swimming pools worth of gold on Earth. Assuming people still find it valuable 100 years from now, it will always go up.

What the rich are doing, which is interesting, is keeping their gold off shores. There are places like Das Safe in Austria, which you can actually store gold bars in and not have to report it. On the other hand, if you keep your gold in a safety deposit box in the US, you actually have to report it.

And if the US wants to reposess it like they did in 1933, you’ll end up losing it.

Commercial real estate

One of the best way to decrease your tax rate is to own depreciating assets. One of the easiest assets to depreciate is a commercial building as you can write it off over time, typically, a 39-year period.

So, if you bought an apartment complex for one million bucks, you can write off $25,641 every year from your taxes.

What the rich are doing is buying commercial real estate that throws off positive cash flow plus is section 8 zoned. Maybe what this means is that if you buy apartment complexes in low-income areas that are zoned, the government is subsidizing the rent. So, if a low income tenant lives in your section 8 apartment complex, the government will pay you the rent for them to live in your building.

For you, that’s pretty much guaranteed income. You can’t really get anything better than that.

Moving assets overseas

During the Presidential election, one of the hot topics was how Mitt Romney has millions of dollars tucked away in the Cayman Islands. The Cayman Islands are a tax haven because they don’t charge any taxes.

People like Mitt are moving their money to tax-free countries, while living in the US, and then investing it. As they invest it and make money, they don’t have to pay gains on their taxes each year. At the end, when they are ready to bring it back, they pay taxes.

This strategy is similar to a captive insurance company as you get to play with the government’s money. President Obama is trying to put a stop to this loophole, but the rich are still finding ways around it.

Conclusion

You may read about things like the rich paying lower tax rates due to things like capital gains, which is taxed at 20% instead of 39.6%, but that’s not the real reason they are saving boat loads of money. It’s actually from the tactics above, which most people don’t hear or even know about.

Now, I am not saying you should or shouldn’t do the things above if you want to save money, I’m just trying to shed some light on how the rich are getting richer.

What are some other ways the rich are getting richer?

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Comments

  1. cool insights , Neil.

  2. Great Piece @Neil Thanks for Sharing

  3. Sadly none of this applies to India :(

    • That’s not completely true Sanket!

      I’m definitely not an expert in this area but I do know that you can form a corporation overseas through which your revenue flows. It’s perfectly legal and you don’t have to be mega rich to make it work for you. It’s a legitimate solution for many internet entrepreneurs who want to protect and grow their wealth.

      @Neil As always, a great post with lots of things to think about. Thank you! ;-)

    • Sanket, very true. However, there may be some alternative investment strategies you can look into.

      • You are right Neil. Although your tips are not directly actionable but I do take the point you are trying to make. That’s been quite helpful and I will definitely consult with someone regarding the investment strategies in India.

        • Hi Guru

          I am a personal finance blogger in India . While the idea’s Neil gave were applicable in US . There are many similar things which can be done in India. I am not saying I have handy tips right now for you, but there are tons of strategies and work arounds which can be done . There are loop holes in taxation systems, which allow you to save tax in different ways.

          I am sure a good experienced CA should be able to show you a better path on this.

          Manish

  4. Hey Neil,
    there is a typo in first line :p how to* rich

  5. So Do rich people also change their primary “residence” to non-state tax states as well when they start taking money out of captive insurance companies ? seems like another move only rich people can make.

  6. Great post Neil. Lots of great information that I can apply soon :-)

  7. Sunaina Widge :

    This is by far the worst post from you in some time, you probably need to understand and research some more about captive insurance…no ones giving 20% compound out in market.

    • I’ve been making 20% on my money for years… it’s possible. You just have to find the right money managers or be good at investing your own money.

      The risk is also that you could lose money.

    • That may be true but in my tax planning business we use captive insurance companies to reduce taxable income by the amounts pumped into the captives as deductible insurance premiums thereby saving business owners huge amounts in income taxes to the tune of over 30%. So the 20% issue is really secondary.

      JL Reyes Tax Planning

  8. Hy, Neil. As soon as I got your email newsletter. I just came here and thought I would be first to comment. But within 1 minutes here are 5 comments. Anyway. Nice post. Is there any idea to break this. So that poor become rick.

    Thanks

  9. Hi Neil

    Great insights….but this is not for me.

    Sapna

  10. Loved this post. Different than your usual content, but just as good.

    Since registering my business in Wyoming I’ve paid almost no business taxes at all. It’s amazing.

    One thing I want to add to the “No state income tax” section is that if you live abroad you can avoid paying almost all personal income tax altogether (Foreign Earned Income Exclusion). Last year I paid almost nothing thanks to this.

  11. Awesome article neil. One small typo I would like to point out. Under the heading ” No state income tax “, in para 3 and line 4 the first word should be “there” instead of “their”.

    Amazing article though! I stay in india but found this article awesome.

  12. Neil,
    Great post with lot’s of valuable money-saving tips. It’s really interesting info about IRS’s. And you’re right – taxes are groving. Also, you absolutaly right about “growing economy”. It’s not healthy, unfortunately…
    Thanks for a great information.

  13. I think the main way the rich are getting richer is by investing their money in buying more assets.

    It’s hard to get the ball rolling when you have no capital.

    However, once you start earning decent money, you can invest it into assets (real estate, etc.), then reinvest the profit from these new assets into buying even more assets, and stay on this virtuous cycle until you are pretty much set for life.

    “One of the easiest assets to depreciate is a commercial building as you can right them off over time. Typically a 39-year period.

    So if you bought an apartment complex for 1 million bucks, you can right off $25,641 every year from your taxes.”

    Did you mean “write off” by “right off”?

  14. The easiest and most cost-effective way of investing in gold and silver is BulionVault. Check it out Neil, I’m sure you’d like it.

  15. Neil, thanks for this! I learned so much here. Whenever I’ve searched for creative ways to save on taxes, I just get people telling me to do the most shady things only. I hadn’t heard of most of the methods you wrote about, so it’s at least good to know.

  16. Amazing article Neil.
    This will come handy to a lot of us.

  17. Thank you for this post. I do now have an idea of getting richer and richer someday.

    Cheers Neil!

  18. Neil. The Main problem for poor people is that they don’t have enough money to invest and this is why their income is low and with low income they can’t think big usually ( I know there are many exception of this).

    And this is why they remain poor.

    On the other hand it completely reverse for richer.

    Thanks

  19. Or you could just invest in an aspiring startup because that is what investors are doing these days including yourself :)

  20. Neil, would love the name of that hedge fund that is averaging 20% annual gains :)

  21. Great Post Neil! You know I always like when you bring up real estate One of these days, I’m going to have to bug you to join us on our Podcast to talk about your real estate ;)

    The one thing you didn’t mention in your section about real estate is that you don’t have to pay cash in order to get that $25,641 in depreciation on the million dollar property … you can finance the majority of the purchase but still take the depreciation on the whole thing. This means if you could put $200,000 down (20%) you’d still be able to deduct that 25k. That’s pretty awesome. Granted, you’d have to pay it back when you sell, (Recapture) but if you do a 1031-Exchange you could indefinitely defer it. Now I’m sounding Nerdy!

    Also – I didn’t realize you were in WA state too. We’ll have to connect some day! (yay for 0% state income tax!)

  22. Great article, but I live in Canada. Maybe you could research one for us?
    On the other hand, if it weren’t for the medical (non)coverage in the US, I might move there – great weather :). Plus, I love Vegas.

    Thanks for sharing.

  23. Many reading may not realize as you do Neil, but the way “the rich” got rich in the first place was creating leverage, building systems that produce extreme value for lots of people, and taking massive action in the right sectors. At least that’s what I would like to think they did to get there and how I am doing it. It’s a better attitude than thinking, he/she must have swindled his/her way to the top.

    • Great points. There is often a misconception, albeit sometimes people do cheat their way to the top. There are tons of legitimate ways to do it correctly.

  24. All over the world it seems the rich have ways to get around the system and save on taxes.
    Being in business, it is good to know how it is done in the US.
    Thanks.

  25. “investing in safer things like real estate” even after 2008, Neil?

    Neil would power of compounding also contribute to rich becoming richer? ..

  26. This article is a joke. The rich don’t get rich off roth ira’s. One, your contribution is limited annually, 6500 this year. Two, in order to qualify, you have to make less than 110,000 a year.

    Do your research before believing info from an uneducated author.

  27. Mr Neil, It is clear that if you have money than you have many opportunities to invest it in a very profitable business. As a professional investment banker, I understand it very well. Anywaz Thank You. Umar

  28. Actually poor folks can get rich. Poor folks do it all the time –its called entrepreneurship (or sports or music or whatever). My wife showed me an interesting aspect of getting rich –put aside monthly (or weekly) savings. Then leverage the savings to invest into something that generates interest –appreciates over time. How do we do this? We live within our means and sacrifice for a better tomorrow. The real issue is that most live outside their means with no leverage or margin financially. The real problem with being poor isn’t being poor (a lot of good, honest hard working people are poor) but being without a “plan of action” to resolve or eliminate the state of being poor.

  29. Great article Neil, a little bit far from your usual genre I would say.
    P.S. No more typos I think :)

  30. This was a very interesting read. The specific details don’t apply to me, since I’m not in the US, but I bet many of the same or similar loopholes and tactics exist in other countries as well.

    Out of interest: was this article dictated with a speech-to-text software? There are a couple of typos that look like possible mis-interpretations of dictation software. I’m asking because I’ve tried Dragon Naturally Speaking several times, over the years, but I could never get good enough results.

  31. What’s this got to do with growing web traffic? I think you posted in the wrong blog, Neil.

    Also, it would be worth putting at the top of the post that it is intended only for Americans; none of this is relevant to anyone outside the USA.

    Rachel

  32. The advice concerning the Roth vs Traditional IRA is right on. I’ve been doing this now for a few years. If you look historically at tax rates, they just keep going up and up (sadly). So, I’d rather take the tax hit now then take the chance of getting robbed by Uncle Sam when I retire.

  33. One question about gold, couldn’t more always be discovered, like oil?

  34. Hi Neil- 1,700+ word post WOW. Was there a reason why you didn’t split it up into multiple posts?

    Thanks
    John

  35. Good points Neil,

    The rich really get richer when they no prosecution, no bid contracts and bailout money.

    This is the biggest difference between the rich and everyone else.

    You might be shocked at all of the companies that received bailout money.

    Oh yeah and the only criminal on wall street is Raj, yeah right.

  36. I would add this to the list: Cost Segregation. If you own a commercial building, this is a huge loophole of the rich. Should definitely look into it. This is what Wal-Mart does for example, and it’s a very effective tool.

    Great research on this article Neil. Well done.

  37. Good stuff. No wonder you’re kind of a big deal!

  38. Sweet post Neil! I’m always looking for new (legal) ways of reducing my tax burden.

    I’m not sure if you’ve seen the recent news on the leaks of secret banking information to the International Consortium of Investigative Journalists, but here is a cool interactive slide show on how offshore tax havens work:

    http://www.cbc.ca/news/interactives/offshore-tax-havens/

    Cheers!

  39. Nice piece, Neil. Most people who try to write about this subject matter can’t pull it off. But it looks like you are following your own advice.

    20% annually isn’t tough. I get oil royalties and income for doing covered call writing on socks that also pay a handsome dividend.

    The issue with insurance is you are expecting you peek earning power or ability to make the most money NOW instead of later. Hence withdrawals are done at a much lower tax basis.

    We have money in the states and Indonesia. But not much savings.

    If you don’t make at least 250K a year this strategy isn’t the best approach. You are better off doing a SEP IRA or Roth IRA if you are employed by a company.

    It’s nice to see someone talking about this for all level of earners. We all want to hear what the rich are doing but seldom get the chance to implement these strategies.

    • Mike, you make very great points. It’s a blueprint for those who can. However, other investing strategies like the ones you outline are terrific as well. Thanks for reading.

  40. We’re investing in BitCoin

  41. I’m not at this level yet but there’s a lot of valuable information here. These are things most rich folks keep secret! Appreciate you sharing all this Neil.

    Also, that 20% you mention is very real. Most people need to realize that the guys who will bring a return that much are not going to do it with a $1000 deposit but at least in the 7 figure mark. You said you’ve invested over one million in a failed web hosting company and that was years ago. You are a lot more successful now and I’m sure your cash assets are much more than that so for the doubters, it’s definitely real to be getting these types of returns. There’s some private equity firms that have been known to bring 10%+ returns in just a few months, but those are for 9 figure deals.

    I kind of rambled, but anyways, thanks for the valuable information.

    -Amir

    • In fact over the long term it has been shown that actively managed funds (mutual and hedge funds) underperform passive investing (whole equity and bond market ETFs)..it’s a fallacy that the more money you have the better the return on your investment! Look at some of the top hedge funds over the years…most are gone over a period of 10 years after a hot hand for a few years.

      What you get with 7-8-9 figures is access to complicated investments which are not necessarily better! in fact, they are designed to suck away fees and commissions enriching the people running these funds.

      I used to work on wall street and i wou

      Read books by jack bogle.

  42. It should be remembered that money is not an object of desire, it is a simple means of trade.

    People’s desire for it scares me.

    The fact that the rich are getting so much richer means that the poor are getting so much poorer. The wealth gap is increasing exponentially, and this is wreacking havoc.

    Ecosystems around the world are collapsing and poverty is mushrooming, all for the chase of the dollar.

    Now I’m not saying this post is positive or negative – as you say just shedding some light on it – but I have to be clear and say that a world where human and natural life has become so insignificant will not be a world worth living in, no matter how much money we have.

  43. This is a bad article. I know it’s your site, and leaving aside all the spelling mistakes, all it does is further create class resentment.

    I live in Australia and we get a lot of US data points like # on food stamps, etc.

    Your problem isn’t the rich, really it’s not. Rich people (generally) provide employment to others. Did you know that a billionaire creates numerous millionaires on their way to wealth (generally).

    Your problem is corporate cronyism. (Google Eddie Obeid and Ian McDonald in Australia for a very good current example of wealth and government power corruption).

    And in any case, if you were being taxed as much as you allude to above, you’d have rocks in your head not to try and minimise this. That’s exactly what the smart money is doing.

    It’s not as if these people are keeping these things secret either. They go to financial planners, the planners structures their affairs in such a fashion that they maximise the preservation of their capital.

    I think the better approach might be to ask WHY people are doing this, and your answer lies in your government’s approach to profligate spending (you’re not alone: France, Italy, Japan, etc). I’d suggest a fairer approach for all is flat tax, no loop holes, no deductions.

    I also don’t really get the context of this post as it relates to what this site is about? It doesn’t really help people generate the capital they need to build wealth.

    Anyway, like I said, it’s your site

    • My goal isn’t to criticize the rich or say that they shouldn’t do it or not do it. More so I was just trying to educate others on how people are saving money on taxes and reinvesting to make more money.

  44. I found this article the most interesting one across the web. Neil provided some interesting points including “no individual income tax states”. Neil, I don’t care about typos or grammar. And why everyone is talking about them? This is not the issue. The most important is the information and it was something to think about. And I like that this post is not very related to a website. It’s good!

  45. Well, there is Legality. Then, there is morality. And finally, there is Choice!

    • I like this quote. Thanks for reading.

      • Thanks Neil.

        Just a thought – can you pls point to any earlier post on DoFollow & NoFollow links. Many of us know ‘How’ but few really understand ‘When’ & ‘Where’.

        Or, a new post on the ‘Myths of DoFollow & NoFollow Links’ will be most welcome!

  46. Hi
    Neil the article doesnot seem interesting, i think its more suitable to take the help of financial adviser that reading this.

  47. Hi Neil.. Hereafter you are my role model!

  48. I don’t live in America, and I am not rich, so the information in this post does not affect me directly, one way or the other. But it is shocking, and I can’t help get the impression that US laws seem to have a bias towards the rich. In my part of the world, people get richer with blatantly illegal methods, in the USA they do so with questionably legal but terribly distasteful methods.

  49. The rich don’t do this in India. They just buy tons of LIC Insurance and sleep tight.

  50. You’re awesome Neil, really cool post. Thanks for digging this up! Now, if I only had $1MM laying around…

  51. You have to go to Austria to open up a Das Safe account — best to travel there, wire money to a local bank, take it out, buy gold, and then deposit in person.

  52. Good insight, Neil.

  53. Ya now a day rich become so richer . nice post i like your blogs
    thanks for posting

  54. Great post Neil – that was fascinating, different, and really unique well-explained content that it hard to find anywhere.

    I really appreciate your tone of voice whenever covering controversial topics (whether it’s this or Google penalties) – keeping it conversational, but also matter-of-fact and “this is how the world is.”

  55. Hey Neil. First off, awesome post – love your perspective outside the normal topics. I do have a question. As someone who has professed a desire to eventually transition to the non-profit world, do you see these strategies you’ve listed as part of a larger issue with gaming the system that needs to be reigned in? Or would you say that your orientation is more along the lines of “haters gonna hate”?

    • I wouldn’t say it’s a philosophy of haters gonna hate. I feel sometimes to do great good you need enormous resources of your own. That way you can dictate how your charitable donations are spent. Look at Bill Gates, he has done great things with his money.

      • 1. Is a simpler tax code mutually exclusive with people getting rich and giving money to charity?
        2. In theory, is there a point at which that tax avoidance by rich/well-connected is so rampant within the country that your professed altruistic side would see it as a problem? Say for instance rather than Romney’s 14% rate in 2011, he paid 0%. Would 0% be justified because he gave his money to his church so they could run anti-prop 8 ads..uh…I mean, gave a lot of money to charity? In your opinion, is there any point that tax avoidance schemes on a large scale becomes detrimental?

  56. Although I don’t live in the US, but I think this applies regardless of what society people operate in: shouldn’t everyone be contributing their fair share — rich and poor alike — towards the greater good of that society, and not trying to dodge taxes?

    Maybe I’m just living in a naive, fantasy utopian world…

  57. To save a lot of money, you need to make a lot of money.

  58. Thank you Neil for enlighting your best ideas. It’s not hard to earn and quick rich in a limited time, if your strategy work better.

  59. I just wonder what are they going to do with this lots of money, i wanna earn bt not this much

  60. Its been years i am following Quicksprout. Supposedly, this is my first comment. I live in India and am not rich and wizard in financial matters. But but…..to have financial knowledge in this financially complex world…it is a must. It is Nirvana. Great post Neil.

  61. Interesting post, especially about some of the methods for avoiding taxes that I did not know about.

    Question – do hedge funds really outperform other options? I thought they are actually riskier? if you have any performance data you can share that would help all of us.

  62. I guess the problem with a lot of these is that you need a lot of money to begin with even attempt them. For instance, buying commercial real estate, investing in hedge funds (most of which have prohibitively high minimum investment levels, iirc) and staring a captive insurance company are all things that you need to be well off to attempt. No wonder all the money stays at the top!

    Good post, though.

  63. I agree with you points but you also missed the point some points that I have noted in the comment I posted in Kingged.com where this post was “kingged”:

    The rich is always getting richer and this has come to be an accepted practice in many places. The examples given by Neil Patel are very correct but the majority apply only to the US system.

    In most emerging economies the rich gets richer after extorting from the poor and wide scale corruption. I am not saying there is no corruption in the US, but to a large extent the developing countries suffer from this the more and the gap between the rich and the poor to gets wider.

    However, the examples are helpful and can guide many to start develop the culture and accumulating more and paying less in taxation.

    Sunday – kingged.com contributor.

  64. Hey, I’m not going to spend a bunch of time analyzing your post, I’m just going to say that, as a Certified Financial Planner whose firm has been around for 36 years and runs an alternatives fund (think Private Equity fund), I think you are teetering on the edge of appropriateness giving financial advice that is this detailed. Most of your suggestions only do well in specific periods of time, and some of them are flat out bad ideas. I love your blog, but suggest you stick to what you’re an expert in until you’ve built a 10-15 year track record as an investor producing above benchmark returns.

  65. Neil, It was a very good piece of info. Thanks for the post.
    I recommend Investing in Gold! :-)
    I put together my savings to buy gold always :-)
    Gold and Land never make you upset

  66. Tax is not my cup of tea. But the way you have presented the topic and the insight of it is just too simple for everyone to understand. Thanks for the share.

  67. A client of mine sent me here. I’m his advisor. Sorry for posting a link before. I didn’t know that would get my comment taken down. I really like your example with the captives! A mentor of mine made me aware of that when I first got into the business.

    If you’re going to make all of this money investing, you really should look into the Infinite Banking strategy. I do it personally and many of my clients benefit from it also. It has been around for over 100 years, but nobody takes advantage because of the massive media “Truth Decay” when it comes to the vehicle you actually use to run the system.

    It will reduce your gross taxable gain significantly ansd become a source of tax advantaged investing for the rest of your life, plus provide a lifetime death benefit – because the actual account for the money is Life Insurance.

    Something to think about. As savvy as you seem to be about money, I’d suggest really looking into it. If you have questions, you can contact me.

  68. Great post Neil I am not sure if it applies in Pakistan or not. Also one more thing this article is giving me a hint that now you’re trying to open some investment firm.. ;)

  69. Great post as always. I actually learned some things here. I’ve heard of ways on saving on taxes, this was a little different.

    I’m all for it, because anything “legal” you can do to save on taxes why not it’s money you made through your businesses, plus don’t forget about “Donations” .

    Thanks Neil

  70. I skipped my heart-beat reading this in today’s Gujarati newspaper:
    “Indian-American Neil to be paid $100 mn by Google”

    I screamed “Oh, that could be surely Neil Patel…(started reading in detail) thank God, he’s not.”

    Even if you are offered in future, I warn you to NEVER accept any of such offer, and keep writing on Quick Sprout. Love you!

  71. And wow, what a co-incidence! This latest post is about “being rich” and that news. :)

  72. You are amazing Neil, really awesome publish. Thanks for searching this up! Now, if I only had $1MM resting around…

  73. If only I had the odd million to invest. As they all say money makes money. I dont think i’ll make that level of money washing cars somehow!

  74. well that was very refreshing i should say. At least now i know that as soon as i am ready, i will have options as to save myself from huge taxes. Inspirational post!

  75. The rich are getting richer because they are wise enough to find and try every possibility of saving. I totally agree with this post.

  76. Yes, Neil Rich are getting Richer; Because of they have know the real values of money and its utilization. They also know the time values of money. When people get the taste of more money,then they try to get more.
    Neil, you have earn huge amount of money from technology sectors due to the well performance with professional knowledge. Thank you for sharing this unique content. I would love to read your every content. When i first visited your site Quicksprout.com for one year before, i read all your post. I always get new ideas from your articles.

  77. Rev. Amos Friday :

    The Strategies are good. But are they applicable in Africa or Uganda my home state?

  78. Neil, have you ever read the reports by Citibank about the top 1% rich people – called the Pluto nomy ?

    Top 1% will always get richer and the bottom 10% will always struggle. And people are letting this continue because they believe someday they will become very rich.

    Capitalism – A love story is a nice movie which explores these topics. But I never knew that there are such methods for tax saving. This should be eliminated!

    • Deepak, you bring up some great points. These are very true assessments. We just have to work with what we have and be charitable to those who do not have as much.

      • Thanks for the reply. It is amazing how you reply to comments – almost everytime. I have been reading your blog for quite some time but never commented. But now I feel like commenting everytime because I know you will read :)

        And if you haven’t watched Money As Debt 1,2,3 – do watch it. It is a very en-lighting documentary.

  79. Neil,

    Great post.
    I’ve been looking into changing the legal entities for a couple small businesses that I’m involved in (advising/I’m an investor).
    Do you have any suggestions for more in depth reading on the C-Corp incentives that you reference? Sounds like a deferred cap gains strategy. I’d like to do some more reading on the subject before spending the $250/hr with my attorney… Hope you can help steer in the right direction.

    • I don’t have too many details… I just use an attorney who does it all for me. :(

      Sad part is, it costs a lot more that way compared to reading up on it online.

  80. cool :)
    awsome post..thanks for sharing

  81. Mohammad Rastgoo :

    First of all, this was a really great post!

    Second, about buying gold, this is as you mentioned a long-term investment. Gold goes up and down not more significantly than other metals, currencies, commodities,… and the fluctuation is mostly tied with political issues or economical incidents that from an economist perspective are not well digestible!

    And Third, to elaborate on keeping money out of US, every once in a while (I know of Once so far), US brings down the taxes for corporations that have funds offshore from 35% to something like 7%. This window can save tons of money.

    Thats my two cents. and Thanks Neil.

  82. A very informative post. Thank you so much for sharing

  83. Hi Neil,

    thanks for the article.

    I guess all riches invested in gold got their XXX handed to them recently.

    A lot of wealthy people start playing with stocks/commodities and lose quite a bit of their fortune because of lack of experience.

  84. What’s amazing is how people think of these types of things to begin with. When I decided to incorporate my business I had lots of people telling me to incorporate it in Delaware instead of New York because of taxes. It just felt smarmy so I didn’t do it, and to date my decision hasn’t hurt me one bit.

  85. You are awesome Neil, really awesome post. Thanks for looking this up! Now, if I only had $1MM relaxing around…

  86. Sometimes Neil gets lost on his marketing way but it shows how cute he is. Nice insight, man.

  87. Can you please explain the process of how to “move it over to these C-corporations” where it is a capital asset?

    Also, do you have a reference or link to more information on “Tax free corporations?”

    Thanks

  88. Neil you have good knowledge about site optimization and traffic generate to website. plz share this with us.

  89. Hello Neil !
    this is awesome post. Very true points you have highlighted in this post. That is new to me that rich people use to invest in gold. In this way they can avoid inflation but they can not maximize their money by investing in some other business. They should take risks.
    Thanks.
    Dion

  90. Hello there, merely ended up being attentive to your blog post by Search engines, and discovered that it’s really educational. My goal is to be aware of belgium’s capital. We’re happy in case you keep on this kind of in the future. A number of other people might be benefited from your publishing. Best wishes!

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