What can crypto investors learn from the wealthy?

Here’s an article I came across: The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

Say what you will about mega millionaires and billionaires — there are takeaways in this article that could apply to crypto holders and taxes. (I’m not an attorney/CPA/etc. so not offering any type of guidance here. Talk to a professional, do your own research, etc.)

From the article:

So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it.

For regular people, borrowing money is often something done out of necessity, say for a car or a home. But for the ultrawealthy, it can be a way to access billions without producing income, and thus, income tax.

The tax math provides a clear incentive for this. If you own a company and take a huge salary, you’ll pay 37% in income tax on the bulk of it. Sell stock and you’ll pay 20% in capital gains tax — and lose some control over your company. But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income. Banks typically require collateral, but the wealthy have plenty of that.

Emphasis above is mine.

To me, it’s no different than something like a home equity loan. People have been using these for years. I have something of value, I can use it as collateral, and I can take out a loan against it. No taxes occur on the loan I took out, even if there was an increase of the value of my asset (the home in this case).

We’re seeing this now in the crypto space. Ability to borrow when we need it, while having collateral to cover it. Whether it be an NFT of significant value, BTC, ETC, etc., we can do what the wealthy does. It may not on the same scale, but it’s available.

So, how could this knowledge be used?

It is also true that some billionaires don’t avoid taxes by avoiding incomes. In 2018, nine of the 25 wealthiest Americans reported more than $500 million in income and three more than $1 billion.

In such cases, though, the data obtained by ProPublica shows billionaires have a palette of tax-avoidance options to offset their gains using credits, deductions (which can include charitable donations) or losses to lower or even zero out their tax bills. Some own sports teams that offer such lucrative write-offs that owners often end up paying far lower tax rates than their millionaire players. Others own commercial buildings that steadily rise in value but nevertheless can be used to throw off paper losses that offset income.

So, perhaps a type of property or item of value could help defer taxes. What would this look like in the crypto world? Some other sort of asset, or virtual property in the metaverse that could be used in a similar way?

Curious how others think about this?