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How to Hide Money Like The Rich - It’s no secret, the rich hide money! And in today’s post, we’ll share with you the most common ways the rich hide money to avoid taxes or for whatever other reason. So, make sure you read tile the end, now, let’s begin, shall we? 

1) Municipal Bonds   

Yes, it is very true that you can hide your money and protect it from being taxed by the government just like the rich do. This is how it works. Municipal bonds are usually granted by local governments or their agencies as a way  of supporting major projects like roads, ports, schools and so on. It is normally for public works.

Source: by Dmitry Demidko

You buy a municipal bond by investing a certain amount of money for a specified period. These bonds tend to attract higher interest rates when compared to traditional savings accounts, as a result, investors and the rich are very attracted to them.

Municipal bonds act as a protective umbrella for your money against taxation. The bonds investments are good because your capital remains safe and it continues to generate interest for you.

These bonds provide you with a reliable income. I sincerely agree that these bonds are a great way of hiding your money like the rich. 

2) Offshore Tax Havens

Offshore tax havens are places or countries that allow people or businesses to keep their money in their country. The tax havens will charge these foreigners extraordinarily little or no tax at all.  

It is very rare for tax haven countries to give  out information to the foreign account holder’s governments. Privacy is key to identifying the best country for a tax haven.

In most countries, it is illegal to have an offshore bank account and if caught you could get into serious trouble.

Switzerland is known to be one of the best tax havens particularly because of its strict privacy rules and security for your money and assets. The Cayman Islands are also on the top list of the best offshore havens.

You will enjoy some  interest from your offshore bank account as your money remains safe. So, this is definitely a good way of hiding your money and enjoy the benefits. 

3) Conservative Easements or Restrictions

A large majority of rich people use conservative easements to make sure they reduce tax on their income. Conservative easement is an agreement between the landowner and the state whereby some rights of the land are transferred to the Easement holder.

However, the ownership of the land is retained by the landowner as he continues to take care of the land. The landowner can decide to either farm the land or keep it as a forest.  

The landowner can also live there if he so wishes. So, the owner of the land still has some rights. By use of this conservative restriction, some have managed to reduce their gross income down to 50%.  

The Conservative Restrictions have influenced many landowners to conserve and safeguard their land.

It is common knowledge that in the United States if you give out your qualified land to a recognized protection body, you can enjoy a federal income tax deduction up to the value of your land. This makes it very clear why the rich  like to hide their money in Conservative Easement. 

4) Qualified Opportunity Zones

By investing in qualified opportunity zones, you will be eligible to benefit from capital gains incentives. This is allowed strictly on this new law.

Opportunity zones are meant to improve the economically poor areas through engaging private investments instead of using tax payer money.

For an area to qualify as an opportunity zone it has to meet certain requirements. One of these requirements is a poverty rate of 20%.  

The investors can only benefit from the capital  gain incentives if they invest through Opportunity Funds. The rich would definitely go for this.

5) Life Insurance 

Life insurance is another way of hiding your money like the rich. For life insurance, you just need to open an account with an insurance company and start paying a certain amount of money regularly as per the laid down policy rules.

Once you put your money into your life insurance policy account, you are not required to pay any taxes –  it is tax-free. Any transactions you do with the insurance company stays between the two of you.

I mean the government or local authorities are not informed. So, any premiums you pay or even the loans you acquire from the insurance company are never taxed.

If the insurance policyholder dies, the beneficiary will receive money intact without any tax deductions. I guess this is a fantastic way of hiding money. The loans you get from your life insurance policy if properly used can change  your life for better.

For instance, you can use the money to start an income-generating business. You may also want to buy a piece of land or any other property of your choice with a prospect of appreciating in the near future.

So, if you really want to hide your money like the rich, just open an account with an insurance company. 

6) Money Gift Giving

Money gift-giving is another practised way of hiding money by the rich, that you can adopt. By giving money gifts you can avoid paying taxes but only to a certain extent.

If you give above the law requirement limitation for free tax gift, then you have to be taxed. In order to avoid being taxed, you can split your money gift and give it in halves or as you deem fit.

If you are giving for education or medical purpose you can channel the gift direct to the school or medical institution to avoid taxation in case the money is above the tax-free limit. 

The United States federal gift tax allows 15,000 dollars tax-free on gifts. So, hide your money by giving tax-free money gifts. 

7) Offshore Subsidiaries

Offshore subsidiaries are known as one of the many ways the rich hide their money. This is very commonly used by big companies, big corporations and international companies  just to mention a few.

The main purpose of having these offshore subsidiaries is to evade taxation. These subsidiaries are registered in countries abroad where corporate tax is minimal.

The corporate tax is normally paid on net income and by the company transferring income to the offshore subsidiary, it will greatly benefit. The company will likewise transfer the expenses to the country with higher tax rates.

This is very clever of them. You can also emulate them and hide money by way of offshore subsidiaries. 

8) Sec.199A Deduction

Sec.199A deduction is a qualified business income deduction that is meant for many people as well as estate. Trust, sole proprietorship, partnership and S.Corporation and companies with limited liabilities.

For all these entities, a tax deduction of up to 20% is allowed. The deduction is not calculated from actual economic expenditure needed for many other business deductions but from assumed business income.  

The 20% deduction allowed on the business income for the eligible taxpayers is a good way of hiding money. This is why the rich do not want to be left out of this beneficial idea of hiding money. 

9) Charitable Investments

Charitable investment is another way the rich use to hide their money. The rich will go to any length to make sure they hide their money so as to avoid paying taxes. This works by donating large amounts of money to charitable organizations.  

The money is donated directly to the charity or is put in a charity savings account. The advantage of this account is that you will see your money grow without any taxation.  

Many donors will let their money grow first before giving it out and by so doing they will be able to give more than they initially had. 

Delaying a little bit more before dishing out the money will give you enough time to deliberate and decide which charitable organization you want to support. 

10) Offshore Bank Accounts

The rich people like hiding their money all over the world where it is applicable and convenient for them. Most of them do it for political reasons and others for security purposes.

You often hear them reason that you just don’t “put all your eggs in one basket”. Security of their money is crucial. Anyway, the primary reason they do it is to avoid high taxation. They search for countries with minimal tax rates or no tax at all.  

For sure it is not illegal to open bank accounts abroad. This is nevertheless not only for the rich - any ordinary person can open an offshore account and likewise enjoy the benefits.

By doing this you will be able to earn capital gain while your money is not being taxed at all. This sounds like fun. So, perhaps hide your money offshore as the rich do and enjoy the benefits as well. 

11) Shell Corporations

A shell corporation is not an active business entity and may not even have major assets. The main idea of these shell corporations is to hide or cover the owners. The government or the locals may never know who the owners are.

Some of these shell corporations could be illegal but there are those that are legit. The legit ones could be used to raise funds for a startup or to obtain various finances.

People are always suspicious of these shell corporations because in many instances they have been used for illegal purposes. It can.also be misused in the case of gray area of tax evasion.

This where people channel their earnings through shell corporations in such a manner that it is not reflected as personal income.  

Shell corporations are mostly set up abroad for the main reason of enjoying the low tax rate or no tax at all. I would finally say that  it is a bit difficult to distinguish the legit ones from the illegal ones. The rich will always find ways of hiding their money, no matter what. 

12) Issuing Stock Options

The rich find issuing stock options as another clever way of hiding their money. They issue the stock options to their stakeholders with the aim of avoiding or lowering the amount subject to taxation.

This is because when stock options are issued, they are never regarded as an expense and it will automatically reduce the profits and so the amount to be taxed will definitely be on the lower side.

Again, the stock options issued are recorded as an expense and they will not reflect as outflow in the account records since there is no cash that changed hands.

This means the company is able to reduce the profits on the records and still enjoy an abundance of profits. This is not only a fantastic way of hiding money, but also a way of motivating the stakeholders to put in more efforts for the benefit of all. 

13) Writing Off Expenses

Most rich people own businesses and so they are able to write off expenses and lower their taxable income. I think this is a very good way of hiding money by the rich.

So, it is important to write off your day to day expenses against your income in order to avoid taxation. Examples of these expenses are car maintenance, entertainment and machines repair etc.

The idea, if possible, is to hide all that you earn. That’s it for today, thank you for reading. Have yourself a great day, and  I’ll see you in the next one.

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