Benjamin Franklin once said that in this world nothing is certain except death and taxes and well I mean he was right about the first part but taxes well that's a different story if you're like most people you're probably paying more than you really need to but look okay the US tax system was designed to reward those who understand it and we want you to keep more of your hard-earned money in this video we're breaking down the US tax pyramid going through every income bracket and leg loophole to show you who's paying the most taxes who's
beating the system and who's paying absolutely nothing legally welcome to alux the place where future billionaires come to get inspired now the game of money is not about how much you earn it's about how much you keep and here at halux we believe you shouldn't be paying a penny over the bare minimum amount of tax that you're legally obligated to but let's be clear this video is not not Financial advice we're not here to tell you what to do with your money what we can do though is give you a fresh perspective on the US
tax system so you can learn how the game is played so that being said let's dive into who pays the most who pays the least and at the end we'll even show you a loophole that billionaires use to pay absolutely nothing okay so let's start with the most common group of us taxpayers the ones who get hit the hardest employees now the the first thing to know about taxes in the US is it doesn't matter if you live in Texas New York or North Dakota if you're an employee you're going to get taxed by the
federal government but not all taxpayers are created equal the United States runs on a progressive federal tax system where as your income increases so does the percentage of it that gets taxed think of it like climbing a staircase where each step gets taller and taller here's how it works let's say you earn more than $1,000 a year 10% of that $1,000 goes to the federal government but then every dollar you earn between $1,000 and $47,000 gets taxed at 12% as your income increases this percentage gets much higher so every dollar you earn between 47 and
$100,000 gets taxed at 22% then it's 24 % the next brackets go even higher once you're earning over $69,950 37% goes directly to Uncle Sam and because of this according to the IRS the top 10% of earners in the US are responsible for around 76% of all federal income taxes so at least when it comes to employees the system is set up so the rich do pay more much more but things get muddier when it comes to businesses and mega corporations but we'll get to those in a moment for now you can't help but think
if you're in the top 1% of income earners in the US 37% is a lot of your money going to Uncle Sam and that's not even taking into account Medicare Social Security and state taxes imagine a Wall Street investment banker earning $1 million a year a nice round number at first glance they're living the dream but reality hits hard once the tax man comes knocking after federal income taxes they're already down by about $320,000 add in New York's state income tax and that's another 65,000 gone and then with Medicare and Social Security another 32,000 when
you do the math those $1 million on paper are more like $580,000 more than 40% of your income is gone before you even see it if you're in a state without income tax like Texas or Florida you will save some of that sure but if you plan to make a lot of money in the US just know that employees get the short end of the stick but the thing is it doesn't have to be this way this isn't much of a secret but the key to keeping more of your hard-earned dollars come tax day is
to go from employee to business owner you see just like employees business owners have to pay income tax but they also have to pay self-employment tax basically you get taxed twice but you end up saving a lot of money if you're clever about it so as an employee your company splits the cost of Social Security and Medicare with you but when you're self-employed you are the company so you're paying for it in full a little over 15% of your profits and then income tax for example let's say you run a small Furniture business you may
make $100,000 a year in profit and that's your income for the year first you pay around $115,000 in self-employment tax and then you pay the federal government and the state if you have to depending on where you live you'll take home somewhere between 60 and $770,000 clean so yeah Uncle Sam still walks away with about a third of your money and of course as your income goes up he gets much greedier and at this this point you're probably thinking wait okay how is this better than being an employee well remember how I said the tax
code was designed to reward those who understand it well this is where things start to get fun unlike employees who are taxed on their paycheck small business owners are taxed on their net income that means the company's earnings minus business expenses and the thing is a lot of stuff counts as a business expense need a car for work well that's a business expense but you can still pick up the kids from school with it have a home office you can write off a part of your rent or mortgage flying internationally for a Friday meeting and
staying the weekend your plane ticket is deductible what smart business owners do is use business expenses to blur the lines between their personal and professional lives at the end of each year you pay less taxes because your net income is technically lower but your lifestyle doesn't suffer for it and yep it's all perfectly legal and this is why starting a business is such a game Cher it's the gateway to taking back control of your life but here's the thing entrepreneurship can change your life but it isn't easy it's a journey filled with challenges decisions and
a million in one things to learn and we wanted to make all of it much simp and that's exactly why we built the alux app our app isn't just another tool it is your personalized road map to launching and growing your business whether you're just starting out or ready to scale the Alo app is packed with the resources you need to build something you're proud of inside you'll find dozens of courses tailored to help you master all the skills you need from your finances to building a strong brand and even scaling your team on top
of daily coaching sessions and and the best part is you can track all the progress you've made towards your goals so you can think of the app as a personal business Mentor in your pocket pushing you to apply what you learn and build the life of your dreams hundreds of thousands of CEOs professionals and entrepreneurs are already using the alux app to take control of their Futures and now it is your turn my friend and to sweeten the deal we're running a promotion until the end of January that will give you our biggest discount we've
ever offered because we want to make sure you head into 2025 with everything you need in place to crush your goals if you download the app and scan the QR code on screen you'll get 50% off the annual subscription price just imagine waking up every day with no boss breathing down your neck no limits on how much you earn just you your dream and the drive to make it happen look that future doesn't happen if you never take action on your goals your first step is investing in yourself so scan that QR code on screen
and sign up to get 50% off your yearly membership we'll see you on the inside but in the meant time we got to talk about some Advanced Tax Strategies that only companies like apple Amazon and Google seem to know about because look there's a huge difference between your typical small business and a giant corporation like Google smaller businesses don't get taxed their owners get taxed from the company's income but corporate corations are entirely different legally speaking a corporation is treated like a person it's an entity that can make its own money own assets and Sue
and be sued corporations have their own identity so they get taxed like individuals well sort of this is where things get a bit crazy here so instead of an income tax that gets progressively higher us corporations are taxed by the federal government at a flat rate of 20 1% of their profit now on paper this seems pretty straightforward you get the number multiply it by 21% and send Uncle Sam his check but in reality not all companies are paying that rate in fact some pay significantly less sometimes even nothing at all and it is totally
legal so let's start small here imagine you've got a coffee shop that's profiting around $1 million a year your taxes are pretty straightforward your just paying 21% and maybe a little something for your state but say your single coffee shop grows into a regional chain and now you're raking in $10 million a year so you hire an accountant who knows the tax system inside and out and they introduce you to a powerful tool deductions okay let me explain so of those $10 million in profit you'd normally have to pay 21% or $2.1 million however your
new accountant reminds you that last year you invested $2 million in new coffee machines but now they're older they're worth half as much technically the corporation's assets have depreciated in value by a million dollar and you can deduct that from your profits so instead of paying taxes on 10 million you're paying taxes on 9 million that's an extra $1 million in your pocket courtesy of tax deductions sweet right now it gets even bigger though your coffee chain explodes and goes Nationwide now you're competing against the likes of Starbucks and you're bringing in $100 million in
profit every year your taxes for that would amount to $21 million but at this point you have a small army of tax experts who can get this way way down you see the government is pushing for sustainable agriculture and they're willing to reward companies that get on board every year you're spending $50 million to buy coffee anyway so why not start buying it all from exclusively environmentally friendly Farms this qualifies you for a tax credit worth 10% of your investment a cool $5 million and what this means is instead of $21 million in taxes the
corporation only has to pay 16 that's an extra $5 million saved just because you decided to go green and that is the power of tax tax credits corporations use tax credits and deductions all the time because think about it you start the year applying for some credit and you do some deduction Wizardry at the end and you could end up saving millions of dollars but this is just the beginning Mega corporations take this to an even crazier level take Amazon for example in 2018 they reported over $10 billion in profit but instead of paying any
taxes they stacked so so many deductions and credits on top of each other they actually got money back from the government $129 million to be exact this is how big corporations turn the tax system into a tool and not a liability but it's expensive Amazon has access to the best lawyers and accountants that money could ever buy and that's not the case for your average Joe Schmo that's why the tax system often feels like a pay towin game you might think it's unfair but it is all legal and when people talk about the rich not
paying their fair share of taxes they're not talking about Amazon they're talking about Jeff Bezos not him specifically but at the end of the day the wealth a company generates ends up in the hands of the people who own it however when Uncle Sam comes knocking the ultra wealthy have more than a few tricks up their sleeve now let's be clear here there is a fine line between what what's legal and what isn't on one hand you've got tax avoidance which is using legal means to reduce your tax bill on the other hand you've got
tax evasion which is lying to the government about what you actually owe totally illegal and totally not cool right now we're talking about how the ultra wealthy avoid taxes which for them is like an art form so let's start with shareholders and investors so when it comes makes money it can either reinvest its profits or pay them out to shareholders as dividends the catch here is that first the company gets taxed on those profits and then the shareholders also get taxed somewhere between 0 to 20% on their dividends but dividends aren't the only way shareholders
make money many prefer to sell their shares when the stock price goes up earning what's called a capital gain now these getx taxed as well but the amount depends on how long you've held the stock if you sell within a year that profit is taxed at the same rate as your regular income up to 37% for the highest earners but if you hold it for a bit longer that rate drops out at 20 no matter how much you've made that's a huge difference and it's why Savvy investors always think longterm however probably the best way
to take advantage of owning a bunch of stock in a huge company is actually to never cash out at all take Elon Musk for example for the richest person in the world elon's tax bill is shockingly low why Well because most of his wealth is in the form of unrealized gains you see instead of selling his Tesla stock and triggering billions in capital gains taxes Elon goes to the bank and says hey lend me a couple of billion dollars if I don't pay you back you can have some of my Tesla stock the bank happily
agrees and why wouldn't they it's Elon Musk and Tesla stock is incredibly valuable but here's the loophole loans are not considered taxable income so Elon gets access to boatloads of cash without selling a single share of his company or paying a dime in taxes he uses that money to do well whatever billionaires do and Uncle Sam is just watching then when it's time for Elon to repay that loan he might use divid dens from his shares or he could take out another loan to roll it over worst case scenario he sells a Teensy bit of
stock to paay it off as long as he pays on time the interest rates on loans like these are practically zero for someone like Elon so if you really think about it he's out there living a billionaire lifestyle tax-free with somebody else's money now this little loophole is hella controversial of course but again it is 100 % legit 100% legal at the end of the day the ultra wealthy didn't make the rules they're just really really good at the game or at least their lawyers and accountants are and that my friend is how they do
it hopefully we did a good enough job demystifying the US tax system for you and showing you how employees business owners corporations and the ultra wealthy all fit into place and if you want to access more ultra wealthy tools and strategies come join us in the alux app for 50% off by scanning the QR code on screen knowledge is power and we've got so much more of it inside all right Alexa thanks for watching we'll see you back here next time until then take care my friend
