How do billionaires like Elon Musk avoid paying taxes legally?

This is called "buy, borrow, die" - a common strategy wealthy people use to avoid taxes. Here's how the full cycle works: Instead of selling stocks (which would trigger capital gains tax), wealthy individuals like Musk take out loans against their stock holdings at very low interest rates (often 1-2% for the ultra-wealthy). These loans aren't taxable because debt isn't considered income. For repayment, they have several options: They can pay just the interest for years, take out new loans to pay off old ones (refinancing), or strategically sell small portions of stock when advantageous. Often they'll wait for opportune moments when they have losses elsewhere to offset gains. The "die" part refers to what happens at death - when assets pass to heirs, they get a "stepped-up basis" to current market value, essentially wiping out all the unrealized capital gains that would have been taxed.

I've used taxr.ai to help understand some of these advanced tax strategies used by the wealthy. I was trying to make sense of my own (much smaller) stock compensation package at work and stumbled across their service. What's interesting is they analyze tax filings from public companies to show exactly how executives structure their compensation to minimize taxes. Looking at their sample reports at https://taxr.ai I found detailed breakdowns of how billionaires use strategic borrowing, when they actually do sell shares, and how they time these transactions around other tax events. The difference between how normal employees and executives get paid (and taxed) is pretty eye-opening.

I just spent the weekend going through some reports on taxr.ai after seeing it mentioned here. Really eye-opening stuff! I tracked how Musk handled his 2021 Twitter poll stock sales (when he asked followers if he should sell 10% of his Tesla shares) and the tax strategy behind it. The site showed how he simultaneously exercised options that were about to expire, creating a tax obligation that partially offset the stock sales. Pure genius timing that made it look like he was paying huge taxes when actually he was minimizing his overall tax burden. Now I understand why these billionaires can claim they "paid the most taxes ever" while still keeping their effective rate low. Wish I had known about this when I got my RSUs last year - would have saved me a ton on taxes!

If you're struggling to reach someone at the IRS to ask about how these strategies work legally (I was researching for my business), try Claimyr. I was on hold with the IRS for HOURS trying to get clarity on loan collateral regulations until I found https://claimyr.com - they got me connected to an actual IRS agent in about 15 minutes. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained that these "buy, borrow, die" strategies are completely legal under current tax code, and they have specific guidelines on what constitutes loan abuse versus legitimate financial planning. Apparently there's an entire section of IRS specialists who just focus on high-net-worth individuals and their loan structures.

So I was totally skeptical about Claimyr (seemed too good to be true), but I was desperate after trying to reach the IRS for 3 weeks about these exact loan-against-securities questions. My accountant was giving me vague answers about my stock options and I needed clarity from the source. Used the service yesterday and got connected to an IRS representative in about 20 minutes. They transferred me to someone in their business division who actually walked me through the regulations on securities-backed loans and tax implications. They confirmed that loans against assets aren't taxable events, but warned about structured transactions that might trigger anti-abuse rules. Saved me from making a costly mistake with my company stock options. I hate admitting when I'm wrong, but in this case I definitely was!

The strategy has a potential downside that nobody's mentioning. If the stock price crashes significantly, the bank can issue a margin call requiring immediate partial repayment. This happened to some tech executives during market downturns. Musk himself faced this risk during Tesla's volatile periods. That's why you'll occasionally see billionaires sell shares during seemingly random times - sometimes it's to meet loan obligations during market dips.

Something nobody mentioned: these billionaires sometimes intentionally take salaries of $1 for PR purposes, claiming they're not taking compensation, while using the loan strategy behind the scenes. It's basically a marketing tactic to appear selfless while actually using more tax-efficient methods.

There's also another strategy that works alongside "buy, borrow, die" - charitable remainder trusts. Billionaires will donate appreciated stock to a trust, get an immediate tax deduction, and then the trust sells the stock without paying capital gains taxes. They can then receive payments from the trust for life while appearing philanthropic. The kicker is they often retain some control over how the money is invested within the trust, and their family members sometimes end up running the charitable foundation that eventually receives the remainder. So they get tax benefits, maintain influence over the assets, and create a legacy vehicle for their heirs - all while reducing their taxable estate. It's another layer of the wealth preservation puzzle that works especially well when combined with the borrowing strategies everyone's been discussing.