Now Everyone Gets To See How The Wealthiest “Legally” Avoid Paying Taxes
The entire country has been waiting to see if the President would turn over his tax returns. Now, nearing the end of his term, he has turned them over. It has been reported that the President paid only $750 in taxes in 2016 and 2017.
While we don’t get to see the details of the much-awaited tax returns, I’m sure there will be some people who will be “inspired” by the information gleaned to want to emulate some of the tax avoiding maneuvers. I would warn anyone attempting that sort of emulation not to do it. Most of the ins and outs you’ll hear about and see regarding the president’s tax returns are designed for the very wealthy.
In fact, according to the IRS, wealthy Americans are the largest source of underreported income. A study published in the National Tax Journal says that the top 1% of American taxpayers account for about 35% of misreported income. So, unless you employ an entourage of top tax attorneys to navigate the ins and outs of tax law, stick to what you’ve been doing. Pay your taxes, report your income and steer clear of IRS trouble.
If you collect a paycheck, remember that it’s much harder to avoid paying taxes on a paycheck than on investments. Keep in mind also, that, in general, the federal government taxes regular wages at higher rates than investment income. The long-term capital gains tax rate maxes out at 20%, and the highest income tax rate is 37%.
As an article in USA Today explains, “In other words, the government keeps $370,000 of every $1 million in salary once you hit the highest tax bracket. For every $1 million in gains on stocks or similar investments – above a threshold of about $441,000 for individual taxpayers and $497,000 for married couples filing jointly – the government keeps $200,000.”https://www.usatoday.com/story/money/2020/09/28/trump-tax-returns-tax-avoidance-strategies/3563685001/