What The Top 0.01% Do With Taxes That You Don't
Why It Matters
Understanding these tactics lets high‑net‑worth entrepreneurs dramatically reduce effective tax rates and preserve wealth across generations, reshaping financial planning priorities.
Key Takeaways
- •Wealthy earn income as capital, not wages, lowering rates.
- •They borrow against assets instead of selling, deferring taxes.
- •Use 1031 exchanges and depreciation to erase taxable gains.
- •Prioritize tax incentives when selecting investments, like real estate or oil.
- •Implement holistic, generational tax strategies, not annual “rifle‑shot” planning.
Summary
Tom Wheelwright, CPA and author, outlines how the ultra‑wealthy structure taxes, contrasting with typical entrepreneurs.
He notes that the richest earn primarily through corporate profits, long‑term capital gains, and QBI‑eligible pass‑through income, which are taxed at 21‑20% versus up to 37% plus payroll taxes for wages. They avoid selling assets, instead borrowing against equity, using debt that is non‑taxable, and employing 1031 exchanges to defer capital gains. Depreciation, especially bonus depreciation, wipes out taxable income on appreciating real‑estate holdings.
Wheelwright illustrates with a “buy, borrow, die” model—starting with four greenhouses, leveraging equity to acquire apartments, then larger properties like Walgreens, and finally passing assets to heirs who receive a step‑up in basis. He cites Elon Musk and Wall Street investors who use margin loans, and highlights government incentives such as 80% drilling cost deductions and 100% manufacturing expensing.
The message is that tax planning must be holistic and generational, integrating investment choice, borrowing strategy, and estate considerations. Entrepreneurs who treat tax returns as a yearly report card and align with a single adviser can replicate portions of the 0.01% playbook, preserving wealth and reducing the effective tax burden.
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