GOBankingRates works with many financial advertisers to showcase their products and services to our audiences.
These brands compensate us to advertise their products in ads across our site.
This compensation may impact how and where products appear on this site.
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information.
you might read more about oureditorial guidelinesand our products and servicesreview methodology.
But theres a good deal of variance within that group.
Do Billionaires or Millionaires Pay More in Taxes?
Either a billionaire or a millionaire can pay more in taxes.
To understand why, lets take a quick detour.
The percentage of your income that is taken as income tax is determined by your total income.
For example, the highest federal income tax rate is 37%.
Anyone earning more than $609,350 as the head of a household is taxed at this rate.
However, for millionaires and billionaires, income tax is typically only a percentage of their total taxes.
Many also pay taxes on equities, real estate and other high-value assets.
The amount they pay can vary substantially.
Someone with a lot of assets could owe more on those taxes than their income tax.
Thats why its impossible to say in the abstract whether billionaires or millionaires pay more in taxes.
It all comes down to their income and how they manage their assets each year.
Still, billionaires have a higher net worth than millionaires.
That doesnt necessarily mean they pay a higher tax rate.
Forgoing a Paycheck
One strategy wealthy people use to avoid taxes is not accepting a traditional paycheck.
For example, Elon Musk receives stock options from Tesla instead of a salary.
He wont pay taxes on those shares until he sells them.
In the meantime, he gets to avoid paying millions in income tax.
This tactic is common amongwealthy founders and CEOs.
People also use tax-advantaged accounts like IRAs to reduce their overall tax burden.
Any money they donate to a registered 501(c)(3) is tax-deductible.
These tax deductions help charities get the funding they need to function.
But they can also be taken advantage of due to the lack of regulation.
For example, Donald Trump famously used money from his foundation to purchase a painting of himself.
That money could have come from funds he donated to his foundation to avoid paying taxes.
This involves selling assets for less than what they paid for them.
When they report this loss, they can write some of the amount they lost off of their taxes.
For example, maybe you like to day trade.
But this year, you lost $3,000 on bad investments.
You could deduct that $3,000 from your taxes under the IRS rules for capital losses.
Note that you might only deduct a maximum of $3,000 per year for bad investments.
However, any extra capital losses you incur will carry forward to future years.
Wealthy people often sustainenough capital lossesto deduct $3,000 from their taxes annually in perpetuity.
Business Write-Offs
Finally, the wealthy tend to claim a high amount of business write-offs.
These can range from private jet excursions to stays in luxury resorts.
But the average person isnt entirely out of luck.
Just remember, the standard deduction for 2024 is $14,600 for singles and $29,200 for married couples.
Final Take
Theres no straight answer to whether a billionaire or millionaire pays more in taxes.
More From GOBankingRates
Share This Article:
