RSPH Blogs - Finances!

  How Do the Rich Avoid Paying Taxes? Almost everyone has heard some version of it: the ultra-wealthy paying close to $0 in federal income tax — legally. Here's how that actually works. Step 1: Invest, Don't Just Earn a Salary The wealthy tend to hold most of their net worth in appreciating assets — real estate, stocks, bonds — rather than a paycheck. This matters because of a key distinction in how these are taxed. Income Tax applies to money you earn — a salary, for instance. Capital Gains Tax applies to the profit from an investment, and critically, it's only triggered when you actually sell the asset. As long as an asset is simply held, any growth in its value is "unrealized" — and unrealized gains aren't taxed at all under current tax law. → Related: What Is the Share Market? (#2) This is the core insight the wealthy build around: if you never sell, you never trigger the tax. Step 2: Borrow Instead of Selling That raises an obvious question — if they ...

What Is an SBLOC (Securities Backed Line of Credit)? How Does It Work? What Does SBLOC Stand For? SBLOC stands for Securities Backed Line of Credit. What Is an SBLOC, Basically? An SBLOC lets an individual borrow against their investment portfolio — using it as collateral — to access cash for personal expenses, without having to sell any of their actual holdings. Because it's structured as a loan rather than a sale, the funds are typically received tax-free . Let's walk through an example to make this concrete. A Worked Example Say there's an investor — let's call her Ms. Y — with $1 million invested in stocks. She wants cash. The obvious option would be to sell some shares — but selling triggers Capital Gains Tax on any profit she's made, and she'd rather avoid that. Because her portfolio is large enough, Ms. Y can use an SBLOC instead. Say she needs $500,000: she pledges half her portfolio ($500,000 worth) as collateral, and within a few days, receiv...