The most unexpected of these companies that circumvent federal taxes is that American e-commerce giant Amazon has not paid federal taxes for two consecutive years. According to Fortune, the Institute of Taxation and Economic Policy (ITEP) data shows that Amazon’s profits in 2018 almost doubled from before, reaching $11.16 billion . In the end, it was still perfect to “escape” federal taxes and also received a tax refund of $129 million.

The other companies who are also enjoying the $0 federal tax benefits this year include Netflix, General Motors, Chevron, JetBlue, US Steel and IBM. – Source: FOXBUSINESS

Ordinarily, these giant profitable companies must pay a lot of tax each year. How do they do not pay federal taxes? Let us take Amazon as an example to see how it could benefit from a good asset planning!

1. Amazon continues to add facilities and purchase new equipment as a business investment, adding a lot of deductions.
2. “Giving stocks to employee replace income”is another form of tax reduction. As stocks increase, the more tax deductibles.
3. Establish warehouses and data centers in various states, create a large number of employment opportunities for locals, and obtain tax benefits.

These are the three main types of tax reduction approach used by Amazon, but this year’s tax return also benefited from Trump’s 2017 Tax Cuts and Jobs Act , which reduced the corporate tax rate from 35% to 21%. This also makes most companies taste the sweetness.

Huge profits, but no tax returns, it seems strange, but it is not illegal, this is not tax evasion, but legal tax shelter. The so-called legal tax shelter is to minimize the tax consequences required by the State Administration of Taxation.

In addition to Amazon’s own tax shelter, there are some general tax shelter methods available for business entities, others may be useful for individuals or families, some may be available for both…

For business owners,

Two major states in the United States become the first choice for purpose of tax shelter, Delaware and Nevada;

In addition to registering the business to a different state, you may not know that there are some daily expenses that can also be tax deductible.

Well for business owner, there are many ways to deduct tax, such as company’s expenses are tax deductible.

1. Telephone fee

You can simply estimate how much your own expenses are for company-related businesses. For example, if you spent 1000 yuan last year, 75% of them were related to the company, you can deduct 750.

2. Dining and entertainment

Any meal related to the company can be taxed at 50%. And going out to a meeting with the company’s customers, entertainment (such as golf, etc.) can also deduct 50% of the cost.

3. Travel expenses

Travel related to the company, including airfare and accommodation, can be reduced by 100% as a business expense.

4. Home office

Many times small businesses can be done at home, such as writing, online stores, and so on. Then you can use your home as a rental office to offset taxes. For example, the size of this room is 10% of the entire house, then 10% of all your house expenses can be used to offset taxes, including property taxes, home insurance, utilities, cleaning fees, and so on.

5. Car expenses

Gas mileage can be tax deducted as part of the company’s expenses, and the car rental fee can also offset part of the tax as office supplies, but the amount that can be deducted is estimated based on the market value of the vehicle. The cheaper the car, the greater the amount of tax that can be deducted, and the more expensive the car, the less of tax that can be deducted.

Others include medical insurance, union dues, fees paid abroad, employee training fees, etc., as long as the application is reasonable, you can avoid tax for you.

For individuals and families

Nine states in the United States do not have income tax, including Alaska, Forida, Nevada, New Hampshire, South Dakota, Tennessee and Taxas.

If you are a business owner and want to avoid both corporate income tax and personal income tax, the state of Nevada will be your dream state.

In addition, there are many states do not have sales tax, inheritance tax, estate tax.

For individuals and families, you don’t have to be an expert, but you have to be aware of some information in order to plan for your own tax.

For example, your income tax bracket; please note that the individual income tax bracket, married but the head of house hold and married couple filed jointly will all have different tax bracket. Below is the tax bracket for married couple filing jointly.

By knowing your tax bracket, you can arrange the distribution of your income by leveraging the Deferred Tax buckets (401k is tax-deferred account: which means you don’t have to pay tax now, but your need to pay tax when you take money out), to shelter some of your money.

For example, assuming both you and your wife combined income is $358,400; both you and your wife are putting $15,000 (total of $30,000) into 401K savings.

You will then be falling into the 32% tax bracket ($358,400 – $30,000 = $328,400, which is greater than $321,450).

Without any planning or accounting for the social security tax, state income tax and medical insurance etc, you will have to pay

$65,497 + ($358,400 – $30,000 – $321,450) * 0.32 = $67,721 tax.

Other than the $30,000 into the 401K, you will be receiving $358,400 – $30,000 – $67,721 = $260,679 into your pocket.

But if either of you and your wife put away $18,500 from each of your salary into the 401k; a total of $37,000 pre-tax dollars were saved into your retirement funding.

You will then be falling into the 24% tax bracket ($358,400 – $37,000 = $321,400, which is less than $321,450).

Your tax consequence will be $28,765 +($358,400 – $37000- $168,400) * 0.22 = $62,425.

So you will be receiving $358,400 – $37,000 – $62,425 = $258,975 into your own pocket.

See, by putting away $7,000 dollars into 401k, you can legally save yourself $5,300 tax, with almost the same amount of cash into your own pocket.

Although this is a simplified example, in real life, it could be more complicated, however the tactic behind is not that difficult.

You just need to find a proper bucket to put your money away. Everybody can implement this, right?

Other than the tax-deferred bucket, there is another tax-advantage bucket, you can leverage to be your tax-shelter. This bucket include roth IRA, roth 401K, municipal bond, and cash value life insurance etc.

Roth IRA, great if you qualify; but it only allows us to put away $6K ($5.5k in 2018), it is under the market risks and there will be a IRS penalty if you plan to take out before 59.5.

Roth 401k, is also great, if your employer sponsors. But it is under the market risks. Again, it has contribution limits as well, you will also be charged a penalty if taking out before 59.5 .

529 college plan, is not bad; but do you know it may negatively impact your kids’ chance of getting tuition aids?

Municipal bond, probably not a good choice, the return is too low.

The last choice is the cash value life insurance, it has no contribution limits, the profits generated in this account is not subject to tax, it has no market risk, very good return, and you will not be penalized if taking out too early or too late; but it does have one important requirement, you have to be healthy.

So far, we talked about re-allocation our assets by leveraging the Tax-deferred bucket and Tax-Advantaged bucket to avoid being overly tax.

Just to clarify, we are not talking about tax avoidance, we are talking about being overly taxed.

Other than the asset allocation, we can start a personal business following the above tax deduction strategies for business…

Of course, we don’t mind to pay our fair share of Taxes, but we also don’t want to be over taxed or paying tax for someone else; especially, when we are trying to save a tiny bit to purchase a house, plan a vacation, prepare to have a baby, or plan to send our kids to a better school, right?

If there are ways to legally shelter our assets from being overly Taxed, why do we want to pay more or pay for someone else?

So if any of these is of interest to you

• To create a Tax shelter for yourself, so you can save a more to yourself…
• To create a Tax shelter for your family and anybody you love…
• To preserve your wealth without hit by the Tax
• To leave a peaceful retirement life without cutting down your income or saving account
• To safely pass your wealth to the next generations