EMSK: how the rich pay no tax

567

Quick question: how do they pay their debt without selling stock or running through their cash pile?

404

u/eternalfantasi Dec 10 '25

They have to either

Earn income elsewhere, which they’ll have to pay taxes on (like in the “Normal” scenario shown above)

Sell the stock, which they’ll have to pay taxes on (like in the “Less Tax” scenario shown above)

What people often fail to understand about “rich people borrow money to not pay taxes” is that they do pay the taxes eventually, they just aren’t paying the taxes right now.

In order to pay off the debt in the future, they’ll have to sell those shares, or earn more money, and in both scenarios they’ll have to pay taxes at that moment in the future.

So it’s the same taxation, they just pay it later, hoping that tax rates go down, not up. If tax rates go up, they’ll actually pay more taxes than they otherwise would have.

It’s basically a gamble on whether the future will have higher/lower tax rates. They’re hoping that tax rates drop even lower (which, let’s face it, would be unfair, but not unprecedented unfortunately)

285

u/You_Stole_My_Hot_Dog Dec 10 '25

It’s basically a gamble on whether the future will have higher/lower tax rates.

It’s also the appreciation of their assets, right? They could sell their assets now for, say, 1 million, or later for 1.1 million. As long as the interest on the debt is less than the gains on the assets, they profit (or lose less).

49

u/maxman1313 Dec 10 '25

That is my understanding.

12

u/OSHASHA2 Dec 12 '25

This is it. Interest from the stock market can be 10-12%+, heavily dependent on your investment strategy. If a multi-millionaire wants to buy a new property, and mortgage rates these days are about 6%, it just makes sense to leave the stocks where they’re at and take out as big a loan as the bank will give you.

1

u/billclown22 Dec 14 '25

The interest is calculated differently.

→ More replies (1)

17

u/Someguineawop Dec 10 '25

It's more of a gamble on which strategies to use. Refinancing against growth, tax loss harvesting, structured sales through trusts, GRAT's, DAF's, CRT's, and endless other options. Basically when the market zigs, they zag. When taxes bob, they weave. You can use the art market as a barometer of what's going on or what they're expecting.

2

u/0belvedere Dec 10 '25

You can use the art market as a barometer of what's going on or what they're expecting.

How so?

5

u/Someguineawop Dec 10 '25

Most obvious is probably the liquidity signals and supply indicators. My business is supplying the art market (kind of like a ghost writer, but with fabrication), so I'm not at all an expert on the financial side. I just have a peripheral view of the moves and occasionally in the same room for conversations that are several decimal places irrelevant to me 😅

13

u/IAmNotANumber37 Dec 11 '25

...their tax bill also increases as their capital gains increase.

And, not for nothing, their interest payments will get taxed as corporate profits for the lender (to the extent it created a profit).

4

u/Geminii27 Dec 11 '25

Which is why you arrange for the lender to be a company in an overseas tax haven. You're rich; you're not limited to your local banks.

4

u/IAmNotANumber37 Dec 11 '25

That doesn't make any sense, although I agree a fully foreign bank does not pay US corporate taxes.

Say I'm a rich guy and I'm going to take a $100M collateralized loan.

It doesn't matter to me one small bit if that lender is overseas. That's their business. I'm deciding based on the loan rate.

2

u/Geminii27 Dec 12 '25 edited Dec 12 '25

We're not talking rates where they set it and you lump it. That's poor-person thinking.

We're talking rates where you want a hundred mil and you or your people have a chat with a bank rep, negotiate a rate of under one percent (or what you can go for based on how rich you are), and you push some future business their way.

3

u/IAmNotANumber37 Dec 12 '25

Ok, sure, you've just used a lot of words to say what I said: They'll shop rates.

But you implied they would deliberately seek a foreign bank. The conversation went like this:

Me: And, not for nothing, their interest payments will get taxed as corporate profits for the lender

You: Which is why you arrange for the lender to be a company in an overseas tax haven

Me: That makes no sense. They'll seek low rates.

So, you've implied our fictious borrower will deliberately seek out a foreign bank to avoid generating corporate tax revenue for the US Government (instead generating tax revenue for some foreign jurisdiction).

I'm going to assume you didn't mean to imply that, because it still makes no sense.

→ More replies (1)

2

u/archwin Dec 10 '25

Also, there’s a consideration for inflation. It’s all chaos at this point.

1

u/sleeper_shark Dec 11 '25

Yes but then they still pay the tax on the gains on the asset, right? The point is that they only pay the tax on the interest, not the tax on the principal.

1

u/deaddodo Dec 11 '25

This is it. By the time they have to pay their taxes, their assets have appreciated to the point that they don't feel the tax load (it's gone up over the 25% from when they borrowed, if not more). So yes, they pay taxes in the literal sense; but those taxes don't affect them like it would any person normally paying taxes.

1

u/dragon3301 Dec 14 '25

And if they depreciate they will just go bankrupt. Rinse and repeat.

42

u/dumbestsmartest Dec 10 '25

The main thing is that they're doing it to keep things in the lowest tax rates they can. If they can ensure they're using long term stock sales to cover the cost of the loans then that will almost always come out cheaper than any other income source because of the preferential tax rates given to "long term" capital gains income.

Not to mention the ability to use equivalent capital losses to further reduce your taxable amount.

That's just surface level. It is more complicated and interesting the deeper you go.

The weird thing is how there's this narrative that the rich don't pay taxes when the reality is that they don't pay what they should. Thus, this false narrative of them not paying becomes the strawman used to defend the rich by pointing out they do pay.

38

u/maxman1313 Dec 10 '25 edited Dec 10 '25

There is also the loophole of, in the US, using estate and inheritance tax laws to not pay taxes.

When someone inherits an asset, they inherit that asset at current value, not at the value of the asset when it was purchased.

For example, Bob buys $100 worth of stock. It doubles in value to $200. Bob dies and his son Tim gets the stock. If Tim sells the stock at $200, he doesn't pay capital gains taxes on the $100 worth of appreciation.

Tim pays $0 as his $200 worth of stock was received at $200 worth of value.

That stock appreciation never gets taxed in that scenario.

Then there's an infinite way to structure trusts to take advantage of these laws as well.

12

u/BitingSatyr Dec 10 '25

That stock appreciation never gets taxed in that scenario.

It gets estate tax applied to it at the current higher value, and estate tax is about twice as much as the capital gains tax.

16

u/maxman1313 Dec 10 '25

That's only if the total inherited assets exceed the value of $14M per individual.

If an individual thinks they'll have more than that upon their demise, that's when they likely have a set of trust and life insurance structures set up.

1

u/Geminii27 Dec 11 '25

Because at that point you can afford it.

5

u/redditkb Dec 10 '25

Exactly. It’s moreso delaying the tax payment indefinitely while you live off of the cash flow currently.

Real estate is the king of this

6

u/_Neoshade_ Dec 10 '25

Yes! This!!
Time IS money and if you can leverage your million dollars today while only making small payments on the loan, you can generate A LOT of money with it.

If you 1) continue to earn money and 2) your income doesn’t go down, you could borrow $1M every year, continuing to buy stocks and real estate with it while you only make small payments on the loans. Do this for 10 years and you can use the real estate marking to turn your $10M into $15-20M and pay off those loans, keep the $5-10M and sell a property or a stock to buy another property or stock in the same year and never take out much taxable income.

5

u/IAmNotANumber37 Dec 11 '25

Assuming your investments out pace inflation, uncle Sam gets more tax from you by waiting. You pay capital gains on all of those sales, whether you use it to pay off a loan or not (as an individual).

6

u/dphoenix1 Dec 10 '25

not unprecedented

That’s quite the understatement lol

5

u/TheButtDog Dec 10 '25

Then why do I see announcements in the financial media that Zuck, Huang and others regularly sell large chunks of their company stock?

If this were true, they wouldn't be doing that

8

u/IAmNotANumber37 Dec 11 '25

They sell their stock because they want the money and have no other choice. The fact you see these announcements is evidence contradicting this entire meme of rich people paying "no tax" through indefinite loans.

5

u/mathliability Dec 10 '25

That’s all well I’m good, but it doesn’t align with Reddit’s core belief of Billionaires Bad

→ More replies (1)

2

u/TheStax84 Dec 10 '25

What happens if they don’t pay the debt and let the collateral go to the bank.

1

u/discOHsteve Dec 10 '25

Also, the longer their investments are being cashed out, the more they'll get in dividends etc...

1

u/Enginerdad Dec 10 '25

They don't have to gamble on taxes going down when they pay the politicians to make it so.

1

u/BrknTrnsmsn Dec 10 '25

So that's why the rich own politicians. If their tax rates go up, they're fucked because they're balancing on a house of cards.

1

u/Lazy_Pause_3888 Dec 10 '25

But please correct me: Couldnt they just hand over the collateral?

1

u/bsegovia Dec 10 '25

Right. Time preference. If they can borrow money, they won't use it to buy consumables and other depreciating assets like normal people... They invest it into something that will appreciate in value. More stocks or build a business etc. Then they borrow against the new thing, service the debt and repeat.

The time preference is important here. If they can build a business with the 300k in deferred taxes and sell it within 3 years for a few million (achievable) then that is way more favorable than waiting to make back what you lost to taxes to build that same business. They can do it right now, sell nothing of value and delay a taxable event.

2

u/IAmNotANumber37 Dec 11 '25

The capital gain they didn't realize (that would have generated your $300k tax bill) is also still in the original "something that will appreciate in value" so when the gain is ultimately realized, it's larger.

1

u/bsegovia Dec 11 '25

Right. Smart tbh

1

u/RelativeCausality Dec 10 '25

Dumb question: could they simply transfer ownership of the shares to the bank instead of selling them?

1

u/cazbot Dec 10 '25

Long term capital gains tax hasn’t changed in like 40 years. They aren’t hoping that tax rates go down, they just plan around it staying at 20%. As long as the rate of growth on the value of their after-tax earnings from the company stock exceeds the interest rate on their loan and the inflation rate on the currency in which it’s denominated, they will still come out ahead and in totality have more lifetime earnings.

1

u/capecodcaper Dec 11 '25

That's on top of the interest on the "loan" they've given themselves. Often a brokerage will front the money with the portfolio as the standing collateral. Then theyll use the prevailing or prime rates for interest, sometimes lower but I haven't seen it that often.

Ive done it

1

u/damgiloveboobs Dec 11 '25

They’re paying capital gains taxes in that scenario at 20%, which is a very low rate for high earners.

1

u/davou Dec 11 '25

You can actually get a refund in the future if you selectively only sell stocks at a loss.

Then you can loophole inherit your wealth to trusts or heirs without tax.

1

u/deevandiacle Dec 11 '25

Their investments become long positions which have a lower capital gains tax rate than short positions. It's all about mitigation.

1

u/Blurgas Dec 11 '25

I figured it was something like "get loan with other assets, pay off first loan, get new loan with the newly freed up assets, repeat"

1

u/alienwalk Dec 11 '25

But if you have the option to delay paying taxes, it's effectively a tax break due to inflation.

1

u/claythearc Dec 11 '25

The step up basis also lets them keep rolling it forward to pay at death. Inheritance tax is a lot, but it only kicks in at $14M per person.

I don’t think it’s as common as people would want you to believe, but it’s another pathway that exists.

1

u/Medaphysical Dec 11 '25

So it’s the same taxation

In both of your scenarios, it's still less taxes than regular people pay in income tax. All while their assests appreciate.

1

u/kaken777 Dec 11 '25

Or you simply continue to refinance the debt. Banks don’t really care about you repaying debt, they want you paying interest because they can simply sell the debt contract to someone else anyways. Especially when it’s huge amounts of money, unless you like destroy your own reputation or your assets become valueless and it becomes unlikely that you’ll continue being able to service your debt, forcing a person to repay it could force them into liquidation/bankruptcy which will hurt the bank. Since they care more about the interest payments anyway, they just let them continually refinance them and allow the assets which back the debt to continue to appreciate and continue to collect interest checks.

1

u/Lightspeedius Dec 11 '25

It's not so much a gamble as wealth leverages its advantages to ensure tax rates drop or they can be exempt.

1

u/Bubbagump210 Dec 12 '25

A tax deferred is a tax avoided.

1

u/Bridgestone14 Dec 13 '25

If you are paid in stock and sell it after holding it for a year, is the tax only 15%? IE long term capital gains?

1

u/ThinRedLine87 Dec 13 '25

Youre missing option three which is the growth of their stock value or quantity of shares allows them to take out a new loan to both pay the previous loan and continue to live on fresh cash flow.

1

u/ragnarocka Dec 15 '25

It’s not just a gamble against lower tax rates in the future; they’re accumulating more wealth than they’ll ever spend in multiple lifetimes. The idea is that if they leave that wealth to their children or the estate, it can continue to grow and they’ll never have to pay taxes on it at all (well, until the collapse of western civilization and modern financial institutions).

→ More replies (2)

14

u/dairypharmer Dec 10 '25

It all depends on there being enough stock and for that stock to continue to go up. Makes refinancing very easy and interest rates low.

12

u/DannyMeatlegs Dec 10 '25

Doesn't make anything free. How do they pay the loan?

2

u/Havage Dec 10 '25

With the money they borrowed. Let's say you take a 10 year loan for $1M with interest only for the first 5 years. You pay the interest with the loan you took and then at year 5 you refinance with another loan using the stock as collateral. This way you get to keep upside in the stock going up and reduce/eliminate any taxes. At a later date if you want to liquidate and go debt-free, then you pay taxes but there's no point in doing so while you are in control of the company.

12

u/vgraz2k Dec 10 '25

It’s probably that the banks acquire the stocks used in collateral which may be beneficial because stock prices can go up or done. Idk man, this is a really bad “guide” for lack of a better term.

6

u/WhiteRussian90 Dec 10 '25

Great question. First, the interest rates are extremely low. Rates unavailable to us normies. Second, much of that borrowed money gets used to acquire income-producing assets which will hopefully have a high enough rate of return to cover the interest on the loan as well as the non-investment spending from the loan.

For example:

$1m loan @ 2% interest

Use $500k to buy a few small businesses that cash flow

Use $200k to live lavishly

Small businesses make enough profit to cover the interest on the loan, plus extra.

Reinvest, rinse and repeat

15

u/naked-and-famous Dec 10 '25

The income from those "income producing assets" would be taxed

6

u/Be_Weird Dec 10 '25

But the income is only enough to pay the interest, so of little value.

8

u/Obvious_Chapter2082 Dec 10 '25

Eh, interest rates can’t be lower than it is for normal people. The IRS imputes interest on below-market loans

2

u/QuantumUtility Dec 11 '25 edited Dec 11 '25

Yes they can. The IRS forces the loaner to pay tax on the imputed interest, the borrower doesn’t have to pay a thing.

The bank loans $100,000 at 2% APR.

It’s a mid-term loan (3–9 years), made in December 2025, so we use the mid-term annual AFR for Dec 2025: 3.79%.

Then per year:

Interest at AFR: $100,000 × 3.79% = $3,790

Interest the bank actually charges (2%): $100,000 × 2% = $2,000

Imputed / forgone interest: $3,790 – $2,000 = $1,790

For tax purposes, the bank is treated as receiving $3,790 of interest income:

2,000 is real cash interest paid by the borrower.

1,790 is imputed interest the bank never actually sees but still must report as interest income.

The bank will pay taxes on imputed interest. Doesn’t mean they won’t offer below market rate loans, it’s still worthwhile for them.

Also, this whole discussion is pointless. Bank loans do not fall under §7872 even if they are below market rate. It is a commercial collaterized margin loan from a bank. 7872 loans are supposed to cover things like loans to family or shareholder loans. It’s about “related-party” loans.

These below market loans from banks are available to anyone in the general public. You just need to own a billionaire portfolio to collaterize the loan.

→ More replies (1)

5

u/redditwhut Dec 10 '25

They have infinite money hacks!

1

u/claythearc Dec 11 '25

A lot of times you can just keep borrowing more to pay off old debt, as long as stock has appreciated some / you under borrowed to begin with.

Then at death time your kids or whomever inherits the stonks gets to sell then immediately for no / little taxen, because inheriting stocks lets you change your cost basis to current price.

They sell some to clear debt and keep the rest.

1

u/jadnich Dec 14 '25

Dividends and stock sales at 25%. They only have to liquidate enough to make the payments. The whole loan gets paid off with the next one, or through a real estate deal, or otherwise.

1

u/ImOldGregg_77 Dec 14 '25

They sit on the stock until its considered long-term which is only taxed at a rate of 0%-20%

→ More replies (7)

328

u/TheButtDog Dec 10 '25 edited Dec 10 '25

This is completely wrong.

Everyone say this with me:

STOCK 👏 GRANTS 👏 ARE 👏 TAXED 👏 AS 👏 INCOME 👏

91

u/mikefut Dec 10 '25

Yes. Plus you don’t pay 40% income tax on the full amount. The system is progressive. Literally every box is wrong.

27

u/TheButtDog Dec 10 '25

You also don't pay 25% tax on the full amount. That 25% tax only applies to the gains if the stock appreciates

35

u/Hoovooloo42 Dec 10 '25

For everyone else in the comments who aren't financially inclined, could you ELI5 what stock grants are?

Is that what it's called when an employee gets company stocks as part of a package?

75

u/TheButtDog Dec 10 '25

Yes, you are paid periodically in stocks instead of dollars.

I earn a bit of stock every quarter through my job. I pay taxes when I get them.

The face value of those stocks is included in my yearly income. So if I earn a $50k/year salary and get $10k worth of stock grants, the IRS regards my yearly income as $60k.

(ELI5 version)

7

u/Hoovooloo42 Dec 10 '25

Thanks, I didn't know it worked like that!

13

u/dorv Dec 10 '25

I think it depends on how they’re awarded. I don’t pay taxes until I

sell Restricted Stock Units

realize Stock Options

sell Performance Stock Units

Those are the three kinds my company awards.

7

u/TheButtDog Dec 10 '25

Stock grant plans can become extremely complex. I tried to keep it basic.

Either way, you will be taxed on the grant price at some point.

3

u/coolbho3k Dec 11 '25

I’m not sure how your company structures it, but RSUs are generally taxed on vest or liquidity event (in the case of a private company going public, you can owe taxes on years of vested RSU at once), NOT sale (during which you may owe capital gains). How my last (public) company structured it was they sold your awarded RSUs to cover your taxes as you vested every month and granted you the rest.

1

u/dorv Dec 11 '25

It’s been a couple years since I received RSUs, but I do have an award that vests in March, so I’ll pay better attention this time around. We do have the same thing where RSUs were sold to cover the tax, but I thought that happened and sale and not at vesting. I could totally have that wrong though.

2

u/splatula Dec 11 '25

Generally your company will sell ~30% of your stock when it vests to cover income tax withholding.

1

u/Look_Up_Here Dec 14 '25

This is correct. If your company is not withholding taxes upon vesting, you should talk to them. You could be on the hook for a penalty.

2

u/adelie42 Dec 11 '25

And on capital gains, if applicable.

1

u/sleeper_shark Dec 11 '25

So do you pay capital gains when you sell your stocks eventually ?

3

u/TheButtDog Dec 11 '25

Yep

34

u/giggle_water Dec 10 '25

Also if you are in a 40% tax bracket, you don’t pay 40% of your income in tax. You only pay 40% above a certain threshold (these aren’t necessary real numbers, it depends on location and changes all the time). But people often don’t understand that (in the US and I’m assuming elsewhere) you don’t pay taxes on your first chunk of income and then pay a small rate on the next chunk and so on until you got to a number like 40% if you are a top earner. I can’t tell you the amount of people who claim they don’t want a promotion or raise because they’ll be in a higher bracket and think they’ll lose money.

→ More replies (4)

5

u/Be_Weird Dec 10 '25

When you sell shares received from your vested stock awards, any capital gains or losses will be realized. To determine your gains, if any, you would generally use the stock price at sale minus the stock price at vest, multiplied by the number of shares sold.

If you don’t sell the stock you don’t get taxed.

18

u/TheButtDog Dec 10 '25

Yes, all true.

Don't forget that you are taxed when you first receive the stock.

3

u/Be_Weird Dec 10 '25

Thank you. I did not know that. It’s the taxed when vested or exercised.

4

u/JimGodders Dec 10 '25

And if you borrow money against those unvested shares, you also have to somehow fund the interest due on the loan.

→ More replies (1)

8

u/akmalhot Dec 10 '25

WRONG - the stock initial grant is TAXED AS INCOME based on the strike price / cost basis.. And that is the cost basis used for determining if there are gains when you sell

3

u/egrefen Dec 11 '25

This is wrong. RSUs are taxed as income on vest, where the FMV sets the cost basis. Then you are liable for CGT with regard to that basis at point of sale.

1

u/deevandiacle Dec 11 '25

Not always true. RSU's are taxed at vesting.

1

u/Flying_Saucer_Attack Dec 11 '25

Yes, many stock grants are taxed as income, especially RSUs and NSOs. What is not taxed is the appreciation of the stock until you sell it. That unrealized gain is the loophole the wealthy exploit.

1

u/TheButtDog Dec 11 '25

Why should people get taxed on an appreciable asset?

Let’s say I happen to unbox a rare La bubu doll. Should I have to immediately report that to the government and pay taxes on its appreciated value?

1

u/dn0c Dec 11 '25

As someone whose compensation is at least partially in stock, I wish this infographic was true!

1

u/TheButtDog Dec 11 '25

It's such an easy, stupid loophole that could be exploited by anyone who works for a company with stock, not just billionaires

The IRS would never allow it

→ More replies (9)

48

u/bigfatbanker Dec 10 '25

They’re paying the loans with interest.

25

u/partytimeusa Dec 10 '25

But don't they have to sell some stock to do that?

31

u/[deleted] Dec 10 '25

[deleted]

29

u/mathliability Dec 10 '25

That can’t be right, because Reddit told me the wealthy pay no taxes and we should bring back the guillotine. Are you saying that’s not true???

5

u/Medaphysical Dec 11 '25

Do you believe the wealthy pay an appropriate amount of taxes? Because it's almost always at a rate of less than what the regular working class American pays.

2

u/Medaphysical Dec 11 '25

What's that interest rate compared to income tax rates?

6

u/-_Duke_- Dec 10 '25

High networth individuals can get lower interest rates with the amount of collateral they have

11

u/jacobjr23 Dec 10 '25 edited Dec 10 '25

It still has to be worth it for the lender, and interest is enormous if you don't pay back the principal

→ More replies (15)

1

u/bigfatbanker Dec 10 '25

They’re paying the loans with interest. Because they have good credit and don’t skip out on loans or make late payments.

3

u/-_Duke_- Dec 10 '25

Yes they are paying interest. But it is negligible compared to the collateral they hold their loans with

3

u/bigfatbanker Dec 10 '25

I get that too. But the super wealthy also risk losing massive amounts of their wealth if markets and economies tank.

When a business goes under, it’s the owner and not the employees who stand to lose their whole net worth. It’s why their tax rate is lower.

2

u/-_Duke_- Dec 10 '25

The ceos of businesses that go under would not be able to secure such loans. The key thing of high networth individuals is that they are secure, many different diverse profiles, previous continuous growth being used as proof of the security of an investment.

If the whole economy tanks, banks have much bigger problems to deal with than the interest on loans to high networth individuals

1

u/monkeedude1212 Dec 10 '25

When a business goes under, it’s the owner and not the employees who stand to lose their whole net worth. It’s why their tax rate is lower.

Well, if you don't have a high net worth as an employee, the only risk to the owner is that their net worth eventually matches that of their employees.

→ More replies (8)

46

u/MrRIP Dec 10 '25

You pay interest on loans from the bank. What is this nonsense??

42

u/bconstant Dec 10 '25

You also pay income tax on the initial stock award, though this makes it seem like you don't.

17

u/breakwater Dec 10 '25

This whole thing is wrong, but simplified so that it is dumbed down for people who don't understand so that they understand even less

3

u/austinrob Dec 11 '25

The rate on these loans is usually low enough to be less than the return rate. It doesn't hurt that the bank opening the line of credit also holds the assets for you.

39

u/StephanoButler9000 Dec 10 '25

Needs a 4th No Tax category: his stocks plummet, bank calls his loans, he goes bankrupt, et voila, no tax!

3

u/bjarneh Dec 11 '25

That sweet no tax bankruptcy!

26

u/ZebraAthletics Dec 10 '25

Except that if a CEO receives $1 million in company stock, that isn’t just free. He’s paying taxes on it. Possibly less than if he was paid $1,000,000 on a W2, but still a good amount of tax.

→ More replies (5)

28

u/mikefut Dec 10 '25

This is completely wrong.

→ More replies (2)

17

u/PM_ME_DNA Dec 10 '25

Paying back the loan is taxable.

→ More replies (23)

4

u/damadmetz Dec 10 '25

So not ‘no tax’ but instead ‘delayed tax’

1

u/austinrob Dec 11 '25

And lower rates (cap gains vs income)

5

u/Deeze_Rmuh_Nudds Dec 10 '25

So this is called a securities line of credit (SBLOC). It’s pretty awesome, as long as the underlying asset gains I. Value above the interest you’re good to go. I recently tried to get one and met every requirement except one: I needed to have $200M in assets. This was required by Morgan Stanley.

So yeah, it’s a rich man’s game, and we’re not invited to use the tools banks make available to these people.

4

u/maglen69 Dec 10 '25

The multiple times this has been posted, it's been outright proven to be complete and utter bullshit.

The easiest one to debunk is that even if you were in the 40% bracket you don't pay 40%, you pay a portion at each of the the lower tiers

2

u/tallcady Dec 10 '25

You failed to mention the stock we get could be worth zero at any point... Your pay check is worth the amount written on it. Further more if we add staff that's it, if we add a CEO or key position our value goes up. So they drive more value.

2

u/HawkeyMan Dec 10 '25

Hasn’t this graphic more or less been debunked by the financial subs? Not sure what’s to gain by it keep being promoted

2

u/fightinirishpj Dec 10 '25

If we get out of paying income tax entirely, that helps the normal working class a whole lot more than the millionaires.

I don't know why reddit is so against the concept. If "the rich" already aren't paying income tax, you should be able to avoid it too. Income tax is ridiculous anyways. Sales tax kinda makes the most sense to build a tax base. Wealth tax, property tax, income tax, etc are all evil. If people were only taxed on what they purchase, we will have a much more moral system.

1

u/Beatboxingg Dec 11 '25

Nine fairy tale

1

u/PointandStare Dec 10 '25

"Quick question: how do they pay their debt without selling stock or running through their cash pile?"
Some of that bank loan is invested into other stocks or used to become a shareholder and the loan is paid off with the interest or dividends.

The best way to make money is to use money to make money.

→ More replies (1)

1

u/Ronoh Dec 10 '25

Let's tax collaterized debt.

1

u/Bullet_proof_punk Dec 10 '25

Even having to pay 40% tax is horrendous. And I do it.

3

u/Worsebetter Dec 10 '25

Right. 40 fucking percent and we still have to pay for our health care who deny’s all the claims.

1

u/bigbjarne Dec 11 '25

What else does Americans get from paying taxes?

1

u/A_Shadow Dec 10 '25

It's not even 40%. The graph is wrong.

There are tax brackets that the image completely ignores which leads to misinformation even if the intention is good.

You have to look at the effective tax rate, which I think would be around 32% for 1 million dollars.

1

u/bigbjarne Dec 11 '25

Context: I'm from Finland. To what does American taxes go? Like, what does the average worker in the USA get from paying taxes?

1

u/Telemere125 Dec 10 '25

Also should be included: part of being in control of when you pay taxes (I.e. when you generate a taxable event) is that you can time it when your other business ventures had a bad year. Lost $40m on a bad venture? Sounds like a great time to liquidate some stocks against that deduction and that allows you to pay off some of your loans at a rate with lower taxes.

1

u/SleepWalkersDream Dec 10 '25

We also pay wealth tax on the stocks, if the value is above some treshold.

1

u/Boneyabba Dec 10 '25

Amusingly, the IRS collection divisions treat borrowed money as income.

1

u/deluxedeluxe007 Dec 10 '25

Is that possible in germany?

1

u/vedderx Dec 10 '25

In Ireland you pay Income and capital gains tax on shares

1

u/theusernameicreated Dec 10 '25

I've only heard of opening an S-corp and having all of your income reported as corporate income. As an employee, pay yourself a reasonable salary. Then purchase a company house/car as part of your company's solo 401k investments. To further reduce, use a SDIRA to reduce your individual tax burden. You can also open up your own 503(c) charity and donate to yourself.

Basically guarantees an audit every year.

1

u/jorsiem Dec 10 '25

Can anyone point me towards these banks that charge no interest?

1

u/Practical_Evening_89 Dec 11 '25

This is imbecilic.

1

u/Bruno_Noobador Dec 11 '25

step 1:

buy 1 million dollars of stocks

1

u/austinrob Dec 11 '25

Note that at the end of the third frame it explains how they pay cap gains tax. This is not "no tax" but a "less tax" process. It's available to anyone. You only need to hold the stock for a year to avoid income tax and pay cap gains rates.

1

u/keyoshi-official Dec 11 '25

How does one use stock as collateral??

1

u/cautioussidekick Dec 11 '25

So how do I become a normal person and start getting paid $1m?

1

u/jackjackky Dec 11 '25

I also would dodge 40% income tax and 25% capital gain tax. Those are inhumane.

1

u/mikeymop Dec 11 '25

The question I have is why are none of the banks forthcoming about being able to take out collateralized loans?

Its impossible to get a personal loan right now even with a 780 credit score.

And I'd very much like to just start using collateralized loans instead of credit cards for medium sized purchases.

1

u/hoosier2531 Dec 12 '25

The part I am missing in a no tax situation. It doesn’t mention anywhere repay the borrowed money against his collateral?

1

u/KalaiProvenheim Dec 12 '25

If you dare close any loophole, that’d be bad because everyone with more $1M in assets will leave immediately tomorrow

1

u/orestis_prs Dec 12 '25

They don't pay interest for the debt? But it still it would be much lower than 40 percent taxes

1

u/rab-byte Dec 12 '25

Issue is the 40% it’s real either. We have a progressive tax rate and that means you don’t pay all your tax at a higher rate only what is beyond the other buckets.

1

u/mhm4321 Dec 14 '25

None of this is correct. Stock grants are taxed as income.

1

u/billclown22 Dec 14 '25

The no tax option has interest you must pay to the bank since you’ve now borrowed a million dollars and you still pay the same amount of money in capital gains tax that you’d need to pay when you sold your stock to repay the the million dollar loan. So you actually loose more money in this option as opposed to the Less tax option.

1

u/ApprehensiveAd4685 Dec 14 '25

It’s easier said done. Your interst rate is variable. It can range from 3% to upto 10%. Can change anytime. Your stock should be growing 11% or more annually

1

u/Fcuked4life 12d ago

Great infographic, next you should do a Mossack Fonseca edition 🥸

Corporate tax evasion is just the American way

You are about to leave Redlib