How to not pay your taxes legally, apparently
111 comments
·July 5, 2025SoftTalker
capitol_
What is legal and what is moral are two circles in a venn diagram.
In a good and just society there is a large overlap between them, and in others there is less overlap.
But it's impossible to build a legal system where there is a 100% overlap, and it would most likely be a broken society in other ways.
I totally agree with your second paragraph, that the government needs to remove loopholes and other ways for people to weasel out of contributing to society. But there will always be some corruption and a lot of money to be earned by only taking from our shared resources and never contributing back.
kelnos
It depends on what your moral code looks like, though.
While I agree that taxes provide for a lot of useful, wonderful things, taxes also provide for things I find morally repugnant.
So yes, we should all pay our taxes. But at the same time, I'm fine taking advantage of any legal methods available to me to reduce my tax burden.
The only thing that sucks about that is that tax avoidance generally becomes easier as you get wealthier, which is unfair.
ffsm8
> But it's impossible to build a legal system where there is a 100% overlap, and it would most likely be a broken society in other ways.
I strongly disagree with this one. It's not that hard to not define loopholes and exceptions. Really, a simplified tax system without such should be the goal, and then the circles so match.
RHSeeger
I expect it is _much_ harder than you think it is.
const_cast
> Really, a simplified tax system without such should be the goal
Yes, it should be, because in addition to complex tax systems introducing loopholes and exceptions, they also become more complex to collect.
If taxes were simple and straightforward, you would sink an entire industry in the US. There's a whole money pit around just getting money from people to their government. That's money you could, instead, be getting as taxes.
Analemma_
To have a tax sytem with no loopholes would almost certainly require having no credits or deductions. I actually think there's something to that idea, but politically it's an absolute non-starter: taxpayers love the credits and deductions they have now and don't want to give them up, and governments love using them to shape policy and don't want to give up that particular tool in the toolchest.
swat535
Who defines objective morality here ?
If you’re going to argue the majority, then I’ll remind you that the majority had no problem with slavary either not too long ago in Western nations.
If you’re goning to argue democratic values, then I’ll remind you that many brutal dictators also rose to power by the same values.
So put another way , by which definition of morality are we drawing this diagram?
ada1981
Paying any tax supports genocide and other US colonization projects, so not paying is the moral path.
danaris
Paying any tax supports programs that provide life-saving food to poor women and children, health care to sick, injured, and disabled people who have no other way of getting it, and enforcement of justice for everyone in the country.
If you're only going to pick one thing that a government does, yeah, it's easy to cherrypick something awful. But the alternative is literal anarchy, which is a) much, much worse for the vast majority of people, and b) 100% guaranteed not to last, as the people either organically organize a government from the bottom up, or some violent strongman (gender-neutral) (but let's face it, probably a man in practice) emerges and enforces an authoritarian government from the top down. And in either of those cases, they'll levy taxes very soon, whether it's to make sure that the things that a representative government needs can happen, or just to take as much as they can from everyone else.
ben_w
Sometimes law is analogised to software; in this analogy, loopholes are bugs.
One who exploits a bug is a hacker. An example of a life-hack is to arrange things to have lower taxation than those who wrote the laws were expecting.
But just as bugs in software are not meant to be exploited even though they can be, there are many loopholes in laws that are not meant to be exploited even though they can be.
Unless the law has a generic catch-all for tax minimisation schemes*, such minimisation may be legal, and yet frowned upon because it wasn't meant to be legal. Or even if it was meant to be legal, but you're rich and the general public thinks you're being unreasonable.
* I think the UK does? Or at least that's what it looked like HMRC was saying last time I was able to file my own taxes there…
antman
They are not bugs, they are backdoors introduced on purpose. No one is forgetting how to close them, its on purpose.
general1726
I think that we are not really far from time, when law text will need to be formally verified to either prevent these kind of loop holes or at least point them out.
spwa4
Don't we have a separate name for intentional bugs? I mean it's not like tax loopholes are there accidentally. They are fully, 100%, intentional features of the tax code.
ben_w
Some are, some aren't.
You can tell the ones which aren't by watching them getting removed in a hurry when the government finally notices too many people using them. 10-15 years back, some colleagues had made businesses for themselves just so they could receive their real jobs' income at the lower rate of dividend income rather than the income tax rate. I am told this is no longer possible.
Conversely there is (or was) what I think was a deliberate loophole for UK inheritance tax — if I remember right (not a lawyer) it works like this: physical objects in your home are all bundled together and valued at £1 for inheritance tax purposes, so fancy art, stamp collections, etc. don't get taxed.
Muromec
We have a name -- it's called "backdoors"
mcv
That's what the issue is: there are loopholes, and far too many of them. The fact that some people get to deduct costs or have access to tax avoidance loopholes that most people don't have access to, is wrong. And governments don't do enough to fix this.
hinterlands
Because most of the "loopholes" aren't actually loopholes: they are created for a specific reason under some specific economic theory. Most often, to encourage people to make certain types of investments, avoid double- or triple-taxing certain activities, etc.
We just almost never talk about it in neutral terms: why was this policy implemented, what are the pros and cons, etc. Instead, it's just political talking points to get people to the voting booth.
SpicyLemonZest
There are some loopholes that aren't actually loopholes, and I can't claim to have counted to know whether it's a majority or not. But programs like the QSBS thing the source article describes are definitely loopholes in the intuitive sense. Politicians wanted millionaire business owners to be somewhat richer, didn't want the political headache of directly giving those business owners our tax money, so they lowered the tax rate on a specific category of income that only millionaire business owners can arrange to receive.
It's true of course that there was an economic theory behind the policy. It's a subsidy; the government thinks it's important for the US to have more small businesses, and hopes that more people will set one up if the financial rewards for doing so are greater. Perhaps you could even find some business owner to explain why they would have stayed in their corporate job if not for the QSBS. But this subsidy could never have gotten majority support if it wasn't obfuscated behind the tax code.
webdevver
i think the latest term is 'tax optimisation'...
you could make an argument that in order to optimise your taxes, you have to be quite wealthy to begin with (hiring a tax guy, etc.) - otherwise you don't have any time left in the day to run your business.
so in practice, the little guy winds up just paying the 'sticker price' so to speak, while the big guy has pros who can make their big profits even bigger.
jt2190
> in order to optimise your taxes, you have to be quite wealthy to begin with (hiring a tax guy, etc.)
Another way of thinking about this is that the wealthy person is incentivized to invest their wealth directly into higher-risk, economy-boosting activities like starting businesses that (if successful) create jobs that then pay income taxes. Ideally tax revenue is generated from this incentive. The wealthy person could just buy gold bars and create no jobs that generate income tax, but they don't get as good a tax deal on that.
phtrivier
I always wonder if there was an opportunity for a startup to "uberize" tax avoidance.
The article is mostly about avoiding taxes on "having your startup acquired" - not everyone will be able to do that.
But setting up funds and deduce everything you buy ? Creating shill companies ? Becoming a trustee for some random that badly wants to avoid their taxes ? Sounds like that can be automated ?
Sure, it would be insanely immoral, and I hope the person who master tax avoidance get to loose access to everything payed by the tax payers, just doe thrill.
Or maybe we should have voluntary taxation ; but, beyond a certain level, you really loose access. Don't want to pay ? Sure. You put off the fires yourself, you heal and tech your kids yourself, you build and drive on your own roads, fund your own research, don't access supermarkets that are full of FDA-vetted food, etc...
In all seriousness, if budgets were voted by "real" people and not representatives, how many of things would survive ? Can you convince people about the usefulness of tax free 10M$ startup sale, where every cent your earn is taxed as some portion ?
Anyway, let the tax avoidance experts be the richest of their graveyards.
coredog64
The IRS takes an extremely dim view of setting up a shell and deducting everything. You don’t have to take my word for it, you can ask Wesley Snipes if 28 months in the federal pokey was worth the illusory tax savings he managed.
f4c39012
If everyone had access to the same kind of tax advice that minimised taxes for the rich, I bet a bunch of loopholes would get closed pretty quickly. Some publicly available templates and simple to follow guides would encourage governments to act when they see a general shortfall in revenue. When new loopholes emerge, rinse & repeat. Maybe everyone would pay their fair share then
smallmancontrov
No, because most loopholes cost $$ to set up so they only break even above a certain income that few people have. You must be this rich to play.
thatguy0900
I'm not sure governments would act on a shortfall in revenue. Some governments seem to just consider money not real, just add a couple trillion to the debt and call it a day
carlosjobim
You could make that argument, but it is incorrect. Creating a limited liability company is one of the few (the only?) things which is still allowed and accessible for any person to do, no matter if you're rich or poor, no matter your family name, no matter your political connections, no matter any visible or invisible handicaps you might have. In most places it costs very little to create an LLC or other similar kind of entity.
If you're "a little guy" - as I would consider myself - there are usually zero open doors and zero opportunities in this world, except for starting your own company. And it is possible to optimize your taxes from the start when your business is small. Most governments and states in the world actively encourage this by giving tax relief to small businesses, and then other types of incentives. The price for "hiring a tax guy" depends very much on the scale of your business, in the beginning it's not a lot of money, if you even need him.
For all this talk about "equality", this is the only thing that actually functions in our modern world.
ryandrake
> Most governments and states in the world actively encourage this by giving tax relief to small businesses, and then other types of incentives.
At least in the USA, I don't think there is any need to "incentivize" going into business via the tax code. Most people who can afford to own a business already do, and many people who really can't afford it still try! "I'd love to start a business and try to make a bunch of money, but those darn taxes are stopping me!" - said no US entrepreneur ever. They're not doing it for these small tax incentives, but they are certainly taking advantage of them whenever they can.
So it seems like we are simply incentivizing activity that's already going to happen and allowing people who were already going to do it anyway to have that activity be not subject to taxes.
pengaru
> i think the latest term is 'tax optimisation'...
How does this differ from the long-standing term "tax avoidance"?
It's the "tax evasion" flavor that gets you into legal trouble afaik.
Muromec
There is a spectrum where tax optimization is one side and tax fraud on the other. Depending on who you ask, some behaviors can be put on different points in it.
lokar
There is nothing wrong with using them. The problem is the mega-wealthy using their wealth to buy these loopholes.
Aurornis
> What on earth is wrong with not paying taxes legally?
The primary anger is at the tax code.
> If the government wants a tax to be paid they need to make it simple and unconditional.
That’s the point. Making people aware of how the tax code is structured and how people take advantage of it is key to building support to change the tax code to what the people want.
smallmancontrov
If person A lobbies a self-serving loophole into the tax code, it's reasonable for person B to object.
> If there are loopholes or ways to legally avoid it, they will be discovered and people will take advantage of them.
Most loopholes take a certain amount of time and effort to exploit, so they only break even if you are above a certain income level. You don't "write ↑ ↑ ↓ ↓ ← → ← → B A on your 1040, collect $200." That's never how it works. It always takes effort to set up the necessary "excuses," this effort can be expressed as a dollar amount, and your dollar savings typically apply in proportion to your overall income, so a given loophole works AMAZINGLY WELL if you are ultra rich, ok if you are super rich, meh if you are rich, and it has negative expected value if you are not rich.
This is true for many things in life. Look for things expressed as a rate rather than a dollar amount. Then ask "what if the dollar amount that multiplied the rate was really big?"
barbazoo
It’s wrong if it’s not equally accessible
> It is incredibly simple to spin up an LLC or C corp and expense all kinds of things. Employees don’t get this benefit.
lucianbr
If I understood correctly, it's "how not to pay taxes when selling your company".
At least some of the advice requires preparation years ahead. What happens if the company does not become as valuable as you expect it to, or at all? Or way more valuable, for that matter?
daft_pink
The problem with your article is that it’s extremely difficult to turn a company into a >$10 million asset value company for the founder and outside of the silicon valley VC world a company that doesn’t generate any net income isn’t worth $10 million. It’s not that simple to conjure up a $10 milliion company out of thin air.
So in the real world choosing QSBS stock results in electing into double taxation, so if you are starting a company to that will make net income that company is going to
Also, just to clarify, the article says save $10 million in tax in at least one place, but what you really mean is $10 million in capital gains taxable income, so really it is saving about 2.38 million in Federal tax (20% plus NIIT) plus the state if the state recognizes QSBS.
In my experience, most people benefit from QSBS after building a company for 10-15 years and selling for $3-7 million.
trollbridge
The headline is a bit clickbait-y. If your business turns a profit, it’s quite challenging to not legally pay taxes on the profits. Not to mention taxes owed on a salary you pay yourself.
If your business just has losses, I suppose it’s true you can eventually find someone else to sell to who apparently wants to spend a lot of money to buy your money-losing business?
coliveira
If you cannot do what the article says, the only reason is that you're not rich enough.
> pay taxes on the profits
There are techniques to show zero profits, or to get tax breaks on these profits. Some of the most successful companies do this.
> taxes owed on a salary you pay yourself.
You don't need to pay anything to yourself. Some of the richest founders proudly say they receive a $1 salary.
jimhi
This article is literally only about legal means to not pay tax when your company makes a profit
swat535
And yet, a trillion dollar corporation like Apple pays little tax.
burnt-resistor
Step 0. In America, be rich to receive all of the legalized tax dodges to pay less than ordinary workers.
Also note that US citizens who leave the country and pay foreign income taxes elsewhere still have to pay federal income taxes just like the only other country that does this, Eritrea. The only way out is to renounce citizenship and be doxed in the Federal Register, pay lots of legal costs, and risk arbitrary demands for $10k fines for "not paying back taxes" and also being denied entry should it be determined for it was "economic reasons" any point in the future.
sailfast
The problem is not that folks aren’t paying their taxes. It is that wealthy individuals have lobbied to make the tax laws what they are.
The quieter and larger the exemption the better.
eli
The hard part is identifying a stock you acquire for cheap or free now but will be worth much more than $10 million in five years.
analyte123
QSBS has to be issued directly from the qualifying company. Stock sold on a secondary basis does not qualify.
jimhi
If you read what I wrote, it doesn't even need to actually be 5 years if the person does some creative stuff with options which I have personally seen.
eli
Sure, to delay the "sale". A surefire way to go from minimal value to multiples of $10 million in fewer than 5 years is even rarer.
FreakLegion
There's no legal 'creative stuff with options' to get around the five-year holding requirement. QSBS can be rolled over into other QSBS without restarting the clock, or you can agree to delay the actual sale (including payment) until you've met the holding requirement. At the end of the day, though, you have to hold the stock for five years, and any early payment you take (e.g. for writing options) is taxed normally.
giarc
@jimhi - might need to update your article. See this other article on the front page now.
https://www.mintz.com/insights-center/viewpoints/2906/2025-0...
jimhi
I saw, I will be keeping a watch if it becomes law.
bgnn
For start-up founders: There are countries, like the Netherlands, where there is no capital gains tax. Move to such a country.
sigmoid10
They don't have an additional capital gains tax, but they still tax you on capital gains. In fact they even tax you specifically on capital gains from savings and investments, but using a fixed assumed percentage gain irrespective of whether your actual gains were lower or higher than that percentage. And they are also going to change that law by 2028 so that it works like any normal capital gains tax. So if you can 10x an investment in the next 2.5 years you might save a bit, but after that it hits you like everywhere else.
mcv
It's effectively a 1.2% wealth tax that's based on a 30% tax on assumed capital gains of 4%. The thing is, the assumed gains are generally far lower than reality, and the tax is also much lower than regular income tax.
lancewiggs
If you are a US citizen then US tax will apply to you wherever you are. People form other countries switch off their home tax if they do not meet residency requirements.
There is no capital gains or wealth tax at all in New Zealand, but only for domestic investments. For offshore investments there is a deemed return that you treat as income, so if your wealth is tied up in illiquid stock then it can be dire.
bgnn
Yeah so your offshore investment ruling is applicable for domestic investment in the Netherlands too.
tecleandor
No thanks, I'm OK paying taxes at home.
diggan
Technically, if you move to Netherlands, that becomes your new home, so you'd be OK with paying taxes there too then :)
StrandedKitty
From what I understand, you are taxed on the unrealized gains from your assets, so you are effectively paying ~2% of the value of all your assets every year. Even if you simply own a stake at a startup, you still have to pay the wealth tax regardless of whether your stake ends up having any real value at all (most likely it won't).
bgnn
It depends. I have been in this situation several times. The benefit of the current regulation is that you can pay 0 income tax over stock options if you exercise them at the value of FMV. This is extremely beneficial for early employees. The disadvantage is that the tax service treat them as any other asset and if the company valuation skyrockets your shares might worth more than the 100k or so threshold they have for Box 3 tax. Ecen in that case you do pay a fractional tax over potential income they calculate over this. This might be tough but a very privileged position to be in as a good lawyer can come to an agreement with the tax service if the prospects are looking good (a potential IPO or acquisition). You will not pay ANY income tax over the profit you made in this scenario.
The same applies to house ownership too for example. I did pay 0 income tax over 150k profit I made over my previous house when I sold it. When the money was on my account the wealth tax started to kick in, but it is after you make the capital gains not at the moment you make it.
piperswe
Doesn't the Netherlands have a wealth tax in lieu of capital gains?
bgnn
It works differently as it is after you make the gain, not at the moment. You can have a start up, buy the inital shares for 1k, sell it for 1M, pay no weakth tax (or close to 0) if your valuation during filing a tax return wasn't above a certain amount, get the cash and move somewhere else. If you stay here you will be taxed slowly every year but the rich doesn't do that as they put their money in LLCs etc.
HWR_14
I don't understand how Thiel was able to buy his PayPal shares using a Roth. I thought you aren't allowed use your Roth to invest in a company you work for.
Can someone who knows more than me explain where I am wrong?
jimhi
He was originally a big investor not a founder (or at least set it up to look that way)
gamblor956
You can't anymore because of Thiel. He's the reason they closed the loophole.
niklasbabel
is the author writing this article from the future? Peter Thiel is 57 years old (2025).
‘Peter Thiel famously bought his Paypal shares (which were valued at a few cents when he founded the company) into his Roth IRA account. When he turned 65, he was able to access the billions that the Paypal equity was worth with 0 tax on it.’
jimhi
Wow for some reason I thought he was 65 already, thanks for the correction
missedthecue
One can access their Roth IRA penalty free starting at 59.5, no need to wait to 65
jekwoooooe
I would bet it’s LLM generated like most content these days
jimhi
The entirety of my blog was written pre-chatgpt and pre-scheduled. You can even check the images I use for all blog posts which were the first generation of ai images from 2021 which are quite bad looking now. LLMs were too awful to use nor would I use them.
v5v3
Dave Chapelle sums it up:
(The donors to the politicians use these loopholes, so why would a politician end it...)
What on earth is wrong with not paying taxes legally? What taxes does anyone pay other than those that they must pay?
If the government wants a tax to be paid they need to make it simple and unconditional. If there are loopholes or ways to legally avoid it, they will be discovered and people will take advantage of them.