This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Take a Cue From the Ultra-Rich on Taxes

CHICAGO ( TheStreet) -- Whether they're hopping a private jet to St. Barts or handing over platinum credit cards at designer boutiques, the ultra-rich operate in a world apart from the average middle-class American.

Those differences are especially striking at tax time. The more money you have, the more options you have for avoiding or minimizing certain taxes.

"When you have a greater number of assets, you're more able to engage in planning," says Bruce J. Wexler, partner at the law firm Loeb & Loeb and chair of its New York trusts and estates department. For wealthy families, taxes are a year-round concern.

While affluent taxpayers may be able to afford a jet-set lifestyle, they can't escape the long arm of the Internal Revenue Service. American citizens must pay U.S. taxes on their income no matter what country it's earned in or where they live. They also must pay capital gains taxes on any profit they make from selling property, whether it's a lodge in Aspen or a penthouse in Paris.

That's why the only way to really save on taxes is to renounce U.S. citizenship. If you move to a tax haven such as the Bahamas or the Cayman Islands, you'll avoid taxes on income, capital gains, and property. Investor John Templeton, who popularized the mutual fund, took this route. But it's not one many American millionaires have emulated.

A more popular option for avoiding taxes is to spread the family wealth among numerous properties and investments. Thanks to the lower capital gains tax, it pays to draw most of your income from investments rather than salary. Warren Buffett pointed out a few years ago that his income is taxed at about 17% percent, while his receptionist is taxed at 30%.

Charitable giving also pays off more when you're rich. If someone in the 25% tax bracket donates $1,000 to their favorite charity, their actual cost is $750. But someone in the 35% bracket would have an actual cost of only $650 for the same donation.

But wealthy families' tax-reduction strategies usually focus on two taxes that don't apply to most Americans: the estate and gift taxes.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs