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How to defer US taxes

taylor.town

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Re: How to defer US taxes

#141

Post by dataflow »

richwater wrote: post #110
nayuki wrote: post #72

> 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 ta…

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?

How do you feel about gift taxes?

Re: How to defer US taxes

#142

Post by jcdavis »

kccqzy wrote: post #136
jcdavis wrote: post #131

Earlier quoted context omitted.

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.

> 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…

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.

Re: How to defer US taxes

#143

Post by anon291 »

HWR_14 wrote: post #135
anon291 wrote: post #22

Earlier quoted context omitted.

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.

The government looks at your transactions as designed to produce that outcome and claws back the money from your children.

Your heirs owe neither your debts nor your taxes

Re: How to defer US taxes

#144

Post by dataflow »

asdff wrote: post #101
celeritascelery wrote: post #64

Earlier quoted context omitted.

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).

When do we finally hit the cliff? Deficit has been going up for decades.

> When do we finally hit the cliff?

When you can't pay the interest anymore?

Re: How to defer US taxes

#145

Post by onedognight »

dsizzle wrote: post #19
singron wrote: post #10

Earlier quoted context omitted.

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…

Yes, and when you do pay it's a lower "real" tax (due to inflation)

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.

Re: How to defer US taxes

#146

Post by iAMkenough »

buellerbueller wrote: post #127
pwenzel wrote: post #71

Earlier quoted context omitted.

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…

>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'…

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?

Re: How to defer US taxes

#147

Post by 3rodents »

fer wrote: post #132
3rodents wrote: post #119

Earlier quoted context omitted.

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.

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 dom…

> 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

Re: How to defer US taxes

#148

Post by thyrsus »

jedberg wrote: post #122
nayuki wrote: post #72

> 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 ta…

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…

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

Re: How to defer US taxes

#149

Post by [deleted] »

munk-a wrote: post #40
dleslie wrote: post #24

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

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

[deleted]

Re: How to defer US taxes

#150

Post by robinsoncrusue »

I am a big proponent and teach my children pay as little taxes as you possibly can. Use all means available that are not fraud. So this article is a delight.

Our government in my generation failed me and my kids, they are busy in fighting wars, manufacturing crises abroad, and doing other nefarious things.

Question: can I use the means in this article to avoid my last year's tax? What asset categories are available to invest to defer my taxes, where can I learn more?

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