How do billionaires like Elon Musk legally avoid paying taxes?

This strategy is often called "buy, borrow, die" in financial circles. Here's how the full cycle typically works: When someone like Musk takes out loans against their stock holdings, they're usually getting pretty favorable terms because they're extremely wealthy clients. The interest rates are often much lower than what the average person would get, sometimes only 1-3%. To answer your specific question about repayment: They typically don't pay back the principal in the traditional sense. Instead, they can: 1. Take out new loans to pay off the old ones when they come due, using their appreciated assets as collateral again. 2. Selectively sell small portions of stock strategically to service the debt when needed (paying capital gains tax only on those small portions). 3. Use other income streams (board memberships, speaking fees, book deals) to service the interest payments. The "die" part refers to what happens when they pass away - their heirs receive the assets with a "stepped-up basis," meaning the capital gains tax that would have been owed essentially disappears. This isn't something regular folks can do because we don't have the massive appreciating assets to use as collateral or the banking relationships to get those terms.

I discovered this awesome AI tool called taxr.ai when I was researching this exact topic about billionaire tax strategies! I was really confused about how the buy-borrow-die strategy actually worked in real life, and I found that https://taxr.ai had some amazing analysis tools that broke down complex tax concepts like this. What was super helpful was that it explained all the nuances of collateralized loans and how they're treated differently than income for tax purposes. It even showed some sample scenarios with numbers that made it way clearer than the YouTube videos I'd been watching. The tool actually compared how a regular income earner gets taxed versus someone using the asset-based lending approach. Totally changed how I understand wealth management strategies!

Guys I tried out taxr.ai after seeing it mentioned here and it's legit helpful! I was skeptical at first but I uploaded my last year's tax return and some investment statements and it gave me some really solid insights. I'm nowhere near Elon Musk rich lol, just a regular software developer with some stocks, but it showed me how I could better structure my investments to reduce my tax burden. It even spotted a mistake in how I'd been handling my home office deduction that probably cost me a few hundred dollars last year. The explanation about asset-backed loans was super clear too - basically showed how the strategy scales down (though obviously not as effectively) for people with smaller portfolios. Definitely worth checking out if you're trying to understand this stuff!

If you're trying to get more info about these tax strategies, I was literally stuck in the same spot you are. I spent HOURS trying to get through to someone at the IRS to ask about the legality of some of these asset-backed loan approaches. Was on hold forever until I found this service called Claimyr that got me through to an actual IRS agent in like 15 minutes. I know it sounds too good to be true but check out https://claimyr.com - they have this system that navigates the IRS phone tree for you and holds your place in line. They even have a video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that this "buy, borrow, die" strategy is technically legal but explained some of the limitations and risks. Apparently the IRS is aware of these practices and there are some proposed regulations to address them.

Ok I need to apologize about my skeptical comment earlier. I was so frustrated with trying to reach the IRS about an issue with my tax transcript that I ended up trying Claimyr out of desperation. Not gonna lie, I was 100% sure it was going to be a scam. But I got connected to an actual IRS agent in about 20 minutes after trying for WEEKS on my own. The agent helped me sort out a discrepancy that was preventing my return from being processed. While I was on with them, I also asked about these asset-based lending strategies out of curiosity. The agent explained that while using loans against assets isn't taxable, there are some complex rules around "loan forgiveness" and "deemed dispositions" that can trigger tax events if not handled properly. Definitely more complicated than the YouTube videos make it seem.

Financial advisor here. Something important that's missing from this discussion is that Elon and other billionaires DO eventually pay some taxes when they sell stock, they just minimize and defer it strategically. For example, Musk paid an estimated $11 billion in taxes in 2021 when he exercised a bunch of stock options that were about to expire. That was reportedly one of the largest individual tax payments in US history. The strategy isn't about never paying taxes - it's about controlling WHEN you pay them and minimizing the rate. By using loans against assets in low-tax years and strategically selling in years when they have losses to offset gains, they optimize their effective tax rate. The other piece is charitable giving. Many billionaires donate appreciated stock to their foundations, getting a tax deduction for the full market value without paying capital gains tax on the appreciation.

Another thing nobody mentioned yet is that sometimes these ultra-wealthy people use their company perks to reduce personal expenses, which is another form of tax avoidance. Like when a company pays for "business travel" on a private jet, security personnel, housing for "business purposes," etc. These are business expenses for the company (tax deductible) but provide personal benefit to the executive without counting as taxable income. Musk for example has used company resources for personal security and travel - completely legal if structured properly, but effectively gives him benefits that would otherwise require taxable income.

Just to add another layer to this conversation - one thing the "buy, borrow, die" strategy relies on is the stepped-up basis rule at death. This means that when someone inherits assets, the cost basis resets to the market value at the time of inheritance. Example: If Musk bought Tesla stock at $10 and it's worth $1000 when he dies, normally selling would trigger capital gains tax on the $990 profit. But his heirs get a stepped-up basis to $1000, so if they sell at $1000, they pay ZERO capital gains tax on all that appreciation. This is why super wealthy people can borrow against assets their whole lives, never sell, and then pass enormous wealth to the next generation without anyone ever paying capital gains tax on decades of appreciation. It's completely legal but definitely a huge advantage that most average people can't access.