[HN Gopher] How to defer US taxes
___________________________________________________________________
How to defer US taxes
Author : surprisetalk
Score : 133 points
Date : 2026-03-19 17:16 UTC (5 hours ago)
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| kg wrote:
| > 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 wrote:
| 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 wrote:
| https://www.irs.gov/newsroom/know-the-difference-between-
| a-h...
| jeffreyrogers wrote:
| 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 wrote:
| >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
| anon291 wrote:
| As a business owner, if you provide labor to the business,
| you have to pay yourself a salary.
| bluGill wrote:
| 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 wrote:
| 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 wrote:
| The point is creating failed businesses is legal and tax
| deductible.
| hirako2000 wrote:
| 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 wrote:
| Because of cost basis step up at death, you can just defer
| forever.
| singron wrote:
| 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 wrote:
| Yes, and when you do pay it's a lower "real" tax (due to
| inflation)
| hirako2000 wrote:
| 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 wrote:
| 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.
| phkahler wrote:
| This is what they call "buy borrow die" or some such. Buy an
| asset, borrow against it, die to reset the basis. Your estate
| will still have to repay the loans, but... that one part I
| don't really understand. Do they just refinance, taking a new
| loan against the newly valued asset?
|
| This all seems to benefit from low interest rates. Was it a
| thing in the 90's? Or even the 80s when rates were much
| higher?
| dminor wrote:
| It's a strategy that's only really available to the ultra
| wealthy, because the banks are willing to give them a
| bespoke loan with a much lower interest rate that's payable
| after they die. There's also a complex trust setup to pass
| the asset to their heirs.
| hparadiz wrote:
| These laws are the way they are so that if a kid has
| their parents die they aren't facing an immediate giant
| tax bill on cap gains. It applies to basically anyone
| inheriting even a normal house. The difference in cost
| basis could be 90% of the value.
| singron wrote:
| You only pay cap gains if you realize gains, so you would
| only face a huge tax bill if you had a pile of cash
| dumped on you. E.g if you inherit a $1M house and sell
| it, and the IRS thinks you own 20% taxes on $900,000 of
| gains, then you have $1M of cash on hand to pay $180K in
| taxes.
|
| (Also, if you live in the house for 2 years and then sell
| it, you can exclude $250K-$500K in gains, but that has
| nothing to do with inheritance).
| toast0 wrote:
| It would depend... elsewhere on thread, someone says
| Canada treats death as disposition, and capital gains tax
| is due for a transfer on death.
|
| Family farms are the sympathetic example of choice. Let's
| say your parent's family farm, that they started from
| nothing in the 1950s is now worth $20M. If you have to
| sell it to pay the taxes, because the estate doesn't have
| $4M to pay capital gains tax, plus $2M for estate taxes,
| then another family farm goes corporate.
|
| Maybe you can inherit the capital property at the
| original owner's basis... then you'd only owe the cap
| gains tax if you sold it, and you'd have money to pay it
| because you sold it. That could work... although one nice
| thing about the step-up in basis on death is that nobody
| has to dig through to find the old records to establish
| basis when there's a clearly established death instead.
| paxys wrote:
| Not sure I understand your example. If you always wait for the
| new version of a product to release the following year then you
| are never going to buy anything.
| numbers wrote:
| but you'd wait only long enough for a version that's good
| enough, not forever.
| brcmthrowaway wrote:
| The projector prices are a scam except for Christie and Barco
| anon291 wrote:
| Suppose I defer $1 million in taxes until after I'm dead, and
| my estate conveniently does not have $1 million in assets left.
| What happens?
|
| In the meantime, I gave all the assets to my children while I
| was alive
|
| The answer is nothing. The government eats the loss.
| HWR_14 wrote:
| The government looks at your transactions as designed to
| produce that outcome and claws back the money from your
| children.
| anon291 wrote:
| Your heirs owe neither your debts nor your taxes
| vidarh wrote:
| In addition to the other reasons given: Sometimes it also makes
| sense if your income is lumpy and you e.g. expect to have years
| where your income will fall into a lower tax band. It then can
| pay to suddenly recognise more income to take out as much as
| you can within the lower band.
| some_random wrote:
| This is touched on briefly, the number one reason is that if
| you can keep deferring your taxes indefinitely then you never
| have to pay them. Your tax burden is wiped away on death so not
| only does it not matter to you but your heirs won't be affected
| either.
| WarmWash wrote:
| 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 wrote:
| This feels like a great way to get audited by the IRS. It does
| not feel like sound advice.
| dgb23 wrote:
| I'm getting very strong sarcastic vibes from the article.
| munk-a wrote:
| 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 wrote:
| 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 wrote:
| 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.
| compiler-guy wrote:
| All of these techniques are entirely routine for the average
| company with even a semi decent accountant, and only marginally
| increase the chance of an audit.
|
| You do have to be sure you follow the rules and avoid various
| gotchas that other people in this section have pointed out, but
| otherwise it is entirely legal and routine.
| trollbridge wrote:
| No kidding. It's pretty normal for a high-growth company to
| not turn a profit for years because they keep on taking on
| expenses to try to grow quickly, and this is explicitly
| allowed now for R&D.
|
| Actively involved owners live off of a salary paid by the
| company.
| jeffreyrogers wrote:
| 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 wrote:
| 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.
| jeffreyrogers wrote:
| 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 wrote:
| 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.
| nout wrote:
| You repay with another loan. Repeat multiple times. And then
| you die.
|
| This is the strategy that people follow.
| whaleofatw2022 wrote:
| 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.
| gamerdonkey wrote:
| The strategy is called "Buy, Borrow, Die"
|
| https://www.theatlantic.com/economy/archive/2025/03/tax-
| loop... (viewable by disabling JS)
| xienze wrote:
| What if I live for, say, decades before dying. Surely the
| lender expects some some amount of repayment before then.
| throwaway667555 wrote:
| Lenders have an amount of capital that they need to
| invest and earn returns -- they're generally not in the
| business temporarily so they don't want their capital
| back. And when the loans are secured by hard assets, e.g.
| publicly traded stocks, there's little risk of default so
| long as the price stays up. In times of rising stock
| prices, there's little to no reason for a debt holder
| (lender) to exit their positions at maturity. Rather roll
| and continue taking the return (interest).
| jeffreyrogers wrote:
| I don't know how these specific loans are structured but
| in real estate it's relatively common for a loan to be
| interest only with a balloon payment (the principal) due
| some number of years in the future. So in theory you
| could just pay off the balloon payment with a new loan
| and repeat the process.
| anon291 wrote:
| A margin loan typically does not require any payments at all
| other than interest. Many loans are like this. Amortization
| for principal repayment is usually something you only find in
| personal or real estate loans
| claythearc wrote:
| There are a bunch of strategies here, but one people oft
| repeat is the "buy, borrow, die" approach. Where, they _are_
| kicking the can down the road, but the magic happens at the
| die step. When the borrower dies:
|
| Your heirs inherit your stocks, with their cost basis reset
| to the current price. This means that they have zero
| appreciation of your purchase of $RIVN at $67, despite it
| being at $420. They can then sell the shares, to pay the
| loans, and not owe capital gains, because there are no gains.
| Additionally, at this step cash can be extracted for no gains
| as well if desired.
|
| So you avoid taxes while alive by taking loans (not income),
| avoiding capital gains (never selling), and then gains
| evaporate through a stepped up basis. There are some
| exceptions here - estate taxes, etc with ways around them
| like trusts, but this is the general mechanism.
|
| Its worth noting though, that its not ironclad. In a
| significant downturn you can be forced to liquidate and it
| will _hurt_ (see the news on Musk right after X purchase).
| Additionally, while people talk about this as being super
| popular, realize that in practice people who take advantage
| of these strategies also still have millions in cash flow, so
| its not a true borrow only $0 tax lifestyle, they will use
| already taxed money to manage them as well.
| avemg wrote:
| I'm familiar with this strategy but there's one thing about
| it that I don't understand: After death, the loans are an
| estate liability, right? Doesn't the estate need to be
| settled before heirs get their inheritance? If i had an
| outstanding $1MM loan, wouldn't the estate need to
| liquidate some of that $RIVN at the $67 basis in order to
| pay the loan? and then whatever $RIVN was left over would
| go to the heirs at a stepped-up basis?
| jeffreyrogers wrote:
| The step up in basis happens when you die, so the estate
| has no capital gain. Then the debts are paid, then the
| heirs get whatever they're supposed to get.
| avemg wrote:
| Ok thank you. That was the key to my misunderstanding.
| claythearc wrote:
| I conflated the two, since it all happens pretty quickly,
| but the estate is actually the recipient of the updated
| basis. So the estate sells @ current price, pays the
| negligible difference on gains from appreciation while
| the estate settles, if any happened, and then passes out
| the rest.
| jeffreyrogers wrote:
| Minor nitpick. The step up in basis actually happens when
| you die (not when your heirs receive the assets), and your
| estate has to pay off creditors before distributing assets.
| So the debt is paid off first, then your heirs get whatever
| is left over. Net result is the same though.
| throwaway667555 wrote:
| When the cash flow from the assets exceeds interest expense,
| you've cashed out the assets without incurring tax on your
| appreciated position and you can afford to pay the interest.
| As for principal, debt is largely not paid back these days,
| especially large bespoke debt secured by liquid and well-
| defined assets. The debt holders (lenders) get paid back
| after death of the borrower or they continue rolling the
| position and collecting their return (interest income). The
| only question in the lender's mind is how much leverage to
| grant on the underlying assets, e.g. blue chip stocks, and
| what to do in a liquidity crunch when rolling.
| PopAlongKid wrote:
| >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.
|
| But in the U.S. you can't rapidly depreciate real estate, it is
| generally straight-line over 27.5 or 39 years (residential vs.
| non-residential). The gain on real estate due to depreciation
| is technically referred to as Section 1250 gain, and if there
| is no gain (which is calculated against your adjusted basis,
| not purchase price), then it follows that there is no Sec. 1250
| gain (often mistakenly called "depreciation recapture").
| jeffreyrogers wrote:
| No, you can do cost segregation to classify some of the real
| property as Section 1245 (which is accelerated vs Section
| 1250). People doing this and then selling is how they get
| unexpected tax bills.
| MichaelFeldman wrote:
| The "unexpected tax bill" usually comes from people not
| realizing they pulled those deductions forward earlier.
|
| Also worth noting, if you don't sell (or you 1031), that
| recapture can be deferred, which is why a lot of investors
| still use cost segregation aggressively.
|
| This is a pretty clear breakdown of how 1245 vs 1250
| recapture actually works on sale if anyone wants the full
| picture:
|
| https://notaxcompromise.com/cost-segregation/depreciation-
| re...
| CGMthrowaway wrote:
| Cost seg
| kccqzy wrote:
| This is exactly why many people became landlords, but changed
| their mind and found that there is no way out. You might decide
| one day to buy some investment property, but after a few years
| when you lost interest in the pursuit, quitting would actually
| give you a huge tax headache in the form of unrecaptured
| section 1250 gain. This is unfair. You can quit a W-2 job or a
| hobby without tax consequences.
| jcdavis wrote:
| Hard to sympathize with the landlord class too much on this
| one. Everyone knows how depreciation schedule works and gets
| in to it in no small part because of that deduction benefit +
| the hopes that via 1031 exchanges etc they can delay it until
| death.
| kccqzy wrote:
| > Everyone knows how depreciation schedule works
|
| Everyone is way too strong a word. Unlike a regular job,
| there is no course or qualification needed to become a
| landlord. In the Bay Area I know lots of people in tech who
| bought a house, couldn't afford mortgage payments (perhaps
| after a layoff) and decided to rent out parts of their
| house. Or perhaps just a particularly smooth talking real
| estate convinced someone to sell their stocks and buy
| investment property.
|
| You might say that not knowing about all housing related
| costs upfront is evidence of financial illiteracy. You
| might also say not knowing about depreciation before buying
| a house is also evidence of financial illiteracy. You might
| even say committing to a mortgage payment while your own
| job prospects disappear is evidence of bad risk management.
| But in real life many people make bad financial decisions,
| landlords included. Landlords do not inherently have more
| financial aptitude.
| jcdavis wrote:
| I'll agree that "everyone" is probably an unfair
| characterization. But the tax benefits of depreciation
| are wildly touted among real estate investors.
|
| If they didn't claim depreciation in prior years they can
| still get it via Form 3115. Yes this is
| complicated/annoying to do (almost certainly need a CPA),
| which you can argue is unfair, but I'm still going to
| have limited sympathy for anyone DIYing in this space
| without talking to a professional.
| KennyBlanken wrote:
| Buying an investment property isn't a job. It's an asset,
| that possibly generates income. That is not a job. That's an
| investment.
|
| A W-2 job isn't an investment. It's a job.
|
| A hobby isn't a job or investment, it's a hobby.
|
| You absolutely do have tax consequences if quitting the hobby
| involves selling equipment, particularly if that equipment
| was something that has to be registered, like a boat, car,
| ATV, etc.
| dleslie wrote:
| That's a great deal more complicated than our TFSA and RSP
| programmes, here in Canada.
| munk-a wrote:
| 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.
| jimt1234 wrote:
| Highly recommend: https://www.youtube.com/@taxleverage
| davidfekke wrote:
| Is this advice from Wesley Snipes?
| simonreiff wrote:
| Haha that made me laugh
| uoflcards22 wrote:
| super cool
| buellerbueller wrote:
| Or, just pay your taxes. We collectively benefit from them.
| racingmars wrote:
| 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 wrote:
| 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 wrote:
| When do we finally hit the cliff? Deficit has been going up
| for decades.
| dataflow wrote:
| > When do we finally hit the cliff?
|
| When you can't pay the interest anymore?
| marcandre wrote:
| Magical thinking! You may as well recommend the government
| prints more money and give it to everybody...
|
| In FY2025, the U.S. federal deficit was $1.78 trillion, with
| total revenue at $5.23 trillion, so clearly it's a majority
| of revenue.
| charcircuit wrote:
| We collectively benefit if you give me $1000 and I give you $1.
| That doesn't mean it's a good deal.
| buellerbueller wrote:
| Your example is zero sum; there is no collective benefit.
| Investment in roads enable commerce. Investments in education
| enable future technology.
| pwenzel wrote:
| Up to now, I would have agreed with you. However, many
| residents of cities victimized by ICE see paying federal taxes
| as money that goes directly toward an enemy that is destroying
| their communities. I will happily pay my city and state taxes,
| but I no longer feel that my my federal tax dollars are helping
| much.
|
| I live in Minneapolis, MN. The Federal government has cut
| public health grants, Medicaid, laid off a large portion of he
| Department of Health, cut Department of Human services, cut
| school funding, cut University of Minnesota funding, cut
| heating assistance, cut flood mitigation, cut USDA programs,
| and cut SNAP. This is just the things I can remember! Our city
| hosts Hennepin County Medical Center, which provides emergency
| care to the entire state, and it is risking closing due to
| federal cuts.
|
| Minnesota has historically paid more in federal taxes than
| other states, and contributes more than it gets back. I think
| it's time for a change.
| buellerbueller wrote:
| >The Federal government has cut public health grants,
| Medicaid, laid off a large portion of he Department of
| Health, cut Department of Human services, cut school funding,
| cut University of Minnesota funding, cut heating assistance,
| cut flood mitigation, cut USDA programs, and cut SNAP.
|
| Not paying taxes isn't going to re-fund these things. In
| fact, it will ensure they don't get funded.
|
| There are always people who don't agree with a particular
| government's funding priorities; if we didn't pay when we
| don't agree, government would happen when we do support its
| priorities.
| iAMkenough wrote:
| Paying federal taxes isn't going to re-fund those things.
| Executive Branch is now spending without Congressional
| approval.
|
| Why pay taxation without getting representation?
| SoftTalker wrote:
| 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 wrote:
| 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 wrote:
| >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-
| notic...
| heyjon wrote:
| 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.
| BeetleB wrote:
| I've had to deal with them multiple times.
|
| They weren't angry with me. They were, however, obstinate.
| They disputed an education related credit. Each time I
| called them, they told me what documents they would need.
| I'd send it, and they'd continue the dispute. The cycle
| would repeat.
|
| Here's what happened:
|
| University sends me tax form. I file with my taxes.
|
| "Just because they sent you the form doesn't mean you
| actually attended the school and paid your fees. Send us
| proof you paid them."
|
| Sent proof of payments to the university.
|
| "Just because you gave them money doesn't mean it was for
| tuition. For all we know they could be parking tickets.
| Send us the billing statement"
|
| Called the university[1] to get a copy of the billing
| statement. Sent to the IRS to show the payments matched the
| tuition billed.
|
| "Sorry, that's not enough. Send us a statement from the
| university with a line item showing the tuition was paid."
|
| Sent it. They finally accepted it.
|
| The university told me they'd never heard from any student
| that the IRS didn't simply accept the original tax form
| they send out.
|
| [1] Keep in mind that this conversation happened 2-3 years
| after graduating.
| twoodfin wrote:
| The IRS has no idea of (for example) your primary residence
| or whether you've been attending a degree program.
|
| It's a lot like the old saw about Microsoft Excel: No one
| uses more than 20% of the features, but everyone uses a
| different 20%.
| something765478 wrote:
| Well, frankly, that's exactly how it _should_ work.
| celeritascelery wrote:
| That seems like a terrible idea. A good tax accountant will
| help you find ways to lower tax burden and save money. The IRS
| has no such incentive, and will probably just tax you at the
| standard rates for your gross income.
| lb1lf wrote:
| I guess the accuracy of such solutions vary by jurisdiction; I
| just received my tax return for 2025 in Norway.
|
| The sum owed I had calculated at the end of 2025 was less than
| 2% off from the sum our IRS equivalent came up with.
|
| Their sum was the most favorable to me, though - they had
| adjusted a deduction I qualified for last year which I had
| missed.
|
| This level of accuracy is down to our IRS knowing just about
| all there is to know about our income, assets, debts &c of
| course - oh, and on there being fewer loopholes in our tax
| code...
| tonymet wrote:
| 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 wrote:
| Not sure that I would classify 7% compounded daily as a low
| interest loan.
| 3rodents wrote:
| How to Not Pay Any Taxes: don't be American.
|
| Living tax free is easy enough for everyone except Americans.
| unclad5968 wrote:
| Where are you living that you don't have to pay taxes?
| 3rodents wrote:
| 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 wrote:
| 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 wrote:
| 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.
| fer wrote:
| Funny pick, because Italy is very strict on this. To stop
| being considered a tax resident in Italy you need to
| deregister from your municipality and register in the
| AIRE (Anagrafe degli Italiani Residenti all'Estero). But
| for the AIRE to accept your application on the Italian
| consulate in any of those countries you need to provide
| proof of permanent residence (address, work contract,
| company ownership, etc). If you don't do that, you're
| still considered resident of Italy for tax purposes, if
| you do it, congrats you're tax resident elsewhere.
| Registering in the AIRE is mandatory if you move, btw.
|
| If you add the legislative decree 209/2023 article 1 that
| modifies the tax code and sets the basis for the centre
| of vital interests, it complicates things even further
| for the "permanent traveler" for simply having a family
| or ever having been long term resident in a country.
| 3rodents wrote:
| Let's pretend my random country generator didn't pick the
| worst possible example. I should have chosen a country I
| am familiar with. Let's take Germany. A German tax
| resident can de-register at any time, so long as they are
| leaving the country, without first establishing tax
| residency elsewhere.
| fer wrote:
| In Germany, unregistering doesn't require registration
| elsewhere, but it doesn't mean you stop being tax
| resident.
|
| If you regularly return to Germany and generally to the
| same place there (i.e. family, friends), and you're not
| tax resident elsewhere, the tax administration will
| consider it your habitual abode. And, you guessed it,
| under the German Fiscal Code (Abgabenordnung), you are a
| tax resident if you have a domicile or habitual abode in
| Germany.
|
| Plus, under Extended Limited Tax Liability (Erweiterte
| beschrankte Steuerpflicht), any significant economic
| presence in Germany (assets, German clients,
| participation in a company, bank accounts) will pull you
| into the tax jurisdiciton for 10 years, not only as
| permanent traveler but also if you move to a low-tax
| country.
|
| So while different, it's similarly difficult. It's
| technically possible but you have to leave Germany and
| basically cut all ties, difficult if you're German.
|
| If you're not German, you can completely escape the claws
| of the German fisc with relative ease. But if you're say
| Spanish, Hacienda will consider you tax resident in Spain
| _even if you never ever lived in Spain (i.e. born
| abroad)_. There 's all sort of sticky tax rules in
| numerous countries: you're tax resident until you prove
| you're tax resident elsewhere, the aforementioned
| nationality fallback, essential ties rules, the
| "domicile" concept (i.e. where you intend to live until
| you die).
|
| Plus, and I reiterate, the difficulty in obtaining a
| simple bank account without a TIN and proof of address in
| most countries.
|
| I'm sure there are corner cases with exotic nationalities
| and carefully selected tax jurisdictions with lax "tax
| residency" tests to rotate along, and numerous nomads fly
| under the radar for various reasons (illegally of
| course), but I assure you it's way more complicated than
| "lol just don't be American/Eritrean and travel all the
| time", plus tax laws constantly change, and not to leave
| you more loopholes.
| 3rodents wrote:
| > Plus, under Extended Limited Tax Liability [...] bank
| accounts [...] Plus, and I reiterate, the difficulty in
| obtaining a simple bank account without a TIN and proof
| of address in most countries.
|
| You're doing what so many people who make this argument
| do. You're taking an extreme example that laws have been
| crafted to tackle and using it to represent the norm. A
| normal German citizen with a normal amount of money
| leaving Germany to become a nomad and travel the world,
| never establishing tax residency in any other country,
| will not _need_ to open a bank account anywhere else, nor
| will they be subject to Extended Limited Tax Liability
| which is designed to capture tax from people who try to
| terminate their tax residency before realizing
| substantial gains on local assets. Completely irrelevant
| to almost every person on earth.
|
| My original assertion is that unless you are American
| (or, apparently, Italian) the normal person can up sticks
| one day and wander the world, and so long as they never
| establish tax residency anywhere, they will be living an
| entirely legal tax free[1] life. Of course doing so
| requires giving up the things humans need, like
| stability, so it is a terrible life for most, but the
| point is, it is legal and easy.
|
| > [...] and numerous nomads fly under the radar for
| various reasons (illegally of course), but I assure you
| it's way more complicated than "lol just don't be
| American/Eritrean and travel all the time"
|
| "illegally of course" again, false. There is no universal
| tax law that we are all subject to. The Common Reporting
| Standard is intended to combat tax evasion. A person who
| does not have tax residency is not engaging in tax
| evasion, they are just a person without tax residency.
|
| Rather than speak in theory and hypotheticals, can you
| point to any real world examples of someone being charged
| / tried / accused of tax evasion because they didn't have
| tax residency?
|
| > plus tax laws constantly change, and not to leave you
| more loopholes.
|
| Why are you framing it as a loophole? Not having tax
| residency isn't a loophole, just as not having a car
| isn't a loophole for a drivers license.
|
| Despite my argument, I am pro taxation. Taxation is
| needed to support society. We pay taxes to contribute to
| the society we are a part of. Taxation isn't punitive.
| But if someone opts out of being a part of a society, if
| they choose to wander the world, without the benefits of
| having a home and community, why would they be expected
| to pay taxes? And to who? Tax residency is a good system,
| a fair system.
|
| [1] tax free is a bad term anyway because tourists pay
| consumption taxes but we're talking about income taxes
| oxqbldpxo wrote:
| 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 wrote:
| > 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 wrote:
| Most tax money goes to social programs. Especially at the state
| and local level.
| mcmcmc wrote:
| 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__ wrote:
| > 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 wrote:
| > 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 wrote:
| 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.
| petcat wrote:
| You're conflating "taxes" with _federal taxes_.
|
| In my state (NY), I pay income tax to the feds and NY state. I
| pay property tax to my county and town. This pays for things
| like roads, cleanup and maintenance, the school district, the
| library, the parks and sports recreations. The community trails
| and wildlife preserves.
| usefulcat wrote:
| The federal government can basically print money. The only
| reason they "need" your tax money is to limit inflation.
| mcmcmc wrote:
| You're not wrong, unchecked inflation is bad for most people
| though. Stable currency is pretty important for trade and
| economic stability. Unless you prefer heating your home by
| burning stacks of cash
| fredgrott wrote:
| 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 wrote:
| The story I read recently involved Montana (MT), not Minnesota
| (MN).
| asdff wrote:
| [deleted]
| nayuki wrote:
| > 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/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 wrote:
| Well, except for that pesky "inheritance tax" thing, which
| definitely affects people who have net worths that hit
| multimillion levels.
| hvb2 wrote:
| 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
| CGMthrowaway wrote:
| Why is the Canadian approach fairer?
| nayuki wrote:
| If I understand correctly, the "buy borrow die" strategy of
| tax avoidance hinges on these aspects of the tax code: Buying
| an asset is not a taxable event. Holding onto an asset and
| letting it appreciate is not a taxable event. Borrowing money
| is not a taxable event. Holding an appreciated asset until
| death will step up its cost basis to the current market value
| (thus erasing any capital gains taxes), and it can be passed
| on but large amounts will trigger inheritance taxes.
| CGMthrowaway wrote:
| Yes but why is the Canadian approach more fair than the US
| approach?
| fer wrote:
| Because wealthy people can perform buy borrow die and
| poor people can't, artificially amplifying generational
| wealth differences.
| twoodfin wrote:
| You don't have to be wealthy:
|
| Homes get a step up basis on inheritance like any other
| capital asset, and home equity loans are quite popular.
|
| Less common but not obscure financial options include
| borrowing against your 401(k) or other equities.
| Groxx wrote:
| 401k and home ownership count as "wealthy" in many
| circles. It's not "I can do whatever I want any time"
| wealth, but it _does_ still mean "this is not an option
| for people who likely need it the most" which is the real
| issue.
| twoodfin wrote:
| How are income taxes a serious burden on "people who
| likely need it the most"?
|
| Those who truly need it the most are typically well into
| the plus column on government transfer payments: On net,
| the government is paying them far more than they're
| paying it.
| fer wrote:
| Talking about homes: if a wealthy person see a
| depreciation of the equity they have a parachute (more
| homes, stocks, etc), if middle class sees a depreciation
| of the equity they're on the street. The risk profile is
| absolutely not the same.
| toast0 wrote:
| In the Canadian approach, as I understand it, all capital
| gains taxes are assessed upon disposition; including
| disposition at death.
|
| In the US approach, capital gains disposed at death avoid
| capital gains taxes.
|
| Here are two similar scenarios where the difference in
| actions is small, but the difference in net estate
| distributed to heirs is large.
|
| Both scenarios: Parent P buys (split adjusted) 100,000
| shares AMZN on Jan 3, 2000 at close for $4.47. Parent P
| has no other assets.
|
| Scenario 1: Parent P sells March 9, 2026 at close for
| $213.49 per share; realizing $209.02 in capital gains per
| share, ~ $20.9M capital gains, $21.4M proceeds. Parent P
| dies March 10, 2026. If cap gains tax is 20% uniformly
| (which it isn't), ~ $4.2M goes to income tax, the estate
| at time of death is $17.2M. If estate tax is uniformly
| 40% of amounts over $15M (which it isn't), the estate tax
| is about ~ $0.9M, and the net estate is $16.3M
|
| Scenario 2: Parent P dies March 10, 2026, without
| selling. The estate promptly sells at close for $214.33.
| $21.4M proceeds, ~ $20.9M capital gains, but no capital
| gains tax is due. Again assuming 40% estate tax over
| $15M, estate tax is $2.6M and the net estate is $18.8M
|
| How is it fair for the heirs of Parent P in scenario 2 to
| get so much more than in scenario 1 when the
| circumstances are so similar?
|
| If you use actual tax brackets, you could make the
| example numbers more accurate, but I don't think it will
| change the results significantly.
| skeeter2020 wrote:
| Alberta doesn't have an estate tax either, only a capped
| probate fee of (I think) a couple hundred bucks.
| richwater wrote:
| Why should the government collect taxes on jewelery I pass down
| to my children? I already paid income taxes on the money I used
| to buy it and sales tax at the point of purchase. Why the hell
| are they entitled to more?
| OfficialTurkey wrote:
| I'm not an accountant or tax lawyer (in fact, I'm not any
| kind of lawyer). My layman's understanding is that value --
| from goods and services -- is taxed when it moves between
| legal entities, be those people, estates, or corporations.
| This is not a prescriptive legal framework as far as I know,
| but is a descriptive framework which I have observed and
| which makes sense to me morally.
|
| You paid income taxes on the money when you earned it because
| it left your employer's pocket and went into yours: the
| ownership of the value (money) has moved. You paid sales tax
| when you bought it because you exchanged money for the ring:
| the ownership of value (money, and a ring) has moved. And you
| pay an estate tax on it when it transfers from your estate to
| your children because, you guessed it, the ownership of value
| has moved.
| jedberg wrote:
| To prevent royalty. That is literally the reason. To prevent
| family dynasties.
| MagnumOpus wrote:
| Why should your children not pay tax on the valuables that
| they acquired _without_ any work, when everyone else has to
| earn money and both pay income tax and then pay sales tax to
| acquire the same jewellery?
|
| (And you don't enter into the equation. You are dead by the
| time the taxation happens.)
| dataflow wrote:
| How do you feel about gift taxes?
| jedberg wrote:
| It's two sides of the same coin. Imagine a simple example:
|
| Mom and dad buy a house for $100,000. When they die it's worth
| $1,000,000. In Canada, you'd pay gains on the $900,000
| difference. In America, you'd pay inheritance tax on the full
| $1,000,000 (but no capital gains). So in America you're paying
| tax on a little bit more (I'm of course ignoring the cap gains
| baseline exception).
|
| But the reason America does it the way it does is because
| imagine it's not a house but a piece of art that mom and dad
| bought 50 years ago. No one know how they got it or what they
| paid for it. How does Canada even reconcile such a thing? How
| can you pay cap gains on it if you have no idea what it cost
| and no one is alive to even help you guess?
| pinkmuffinere wrote:
| Wow this is a great question. How does this work? +1
| Tiktaalik wrote:
| Easier than you'd think.
|
| The value of homes is very well known and assessed annually
| in many provinces (some have weirdly become laggards). So no
| real problem there.
|
| Any piece of art that is of any real value would have a
| provenance and it would be very well known what the value it
| was at any given time and at sale. If no one knows the artist
| or can determine the value it is very safe to say its value
| is nil.
| jedberg wrote:
| It's really not that easy at all. Especially with art or
| jewelry. We can know the current value. It could even be a
| very famous piece of art.
|
| But these types of things are found all the time in attics
| and basements. Art especially is moved around without sales
| records all the time, and jewelry even more-so.
|
| Heck, I have things I bought _myself_ that I have no idea
| what I paid for them.
|
| But I'd sure be upset if I had to pay cap gains taxes on
| these things assume their prior value was zero.
| dwallin wrote:
| The question is not whether the alternative is perfect, the
| question is can it be made better than the status quo. It's
| not that hard to come up with potential mitigations for the
| problems you state.
|
| - A taxable threshold, so people who can't afford lawyers and
| accountants don't need to deal with it. Works well for family
| gifting.
|
| - You don't need to tax immediately, tax it when it the
| profit is realized, eg. When you sell that art.
|
| - Taking out a loan against an asset at an increased
| valuation should trigger a taxable event. (Eg. Stocks go from
| 1b to 2b valuation and you take out a 500m loan. You are
| realizing 250k of gains and should pay tax on that gain.)
|
| - Eliminate stepped up cost basis. This is a ridiculous give
| away.
| thyrsus wrote:
| This year, the first $15,000,000 of an estate is exempt from
| federal taxes, so unless it is on top of a different
| $14,000,001 in estate net assets, the estate tax (a tax on
| the estate) on that $1,000,000 house is $0. [0]
|
| Some U.S. states have an additional inheritance tax (payable
| by the inheritors). Those rules vary. [1]
|
| [0] https://www.irs.gov/businesses/small-businesses-self-
| employe... [1]
| https://www.investopedia.com/terms/i/inheritancetax.asp
| fogzen wrote:
| 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 wrote:
| > 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 wrote:
| >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.
| deadbabe wrote:
| 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?
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