[lovecg]

Do people do that? Can I e.g. borrow against my assets and not pay any taxes? Curious to learn more.

[dismalaf]

When you get a loan you don't pay taxes. You pay taxes on the income used to pay it back, or the gains when you sell an asset to pay it back.

[lovecg]

Yeah I’m confused about this part. Is there some loophole where they never have to pay the loan back? Otherwise they’d be taxed at that point.

[fwsgonzo]

The loopholes are well known at this point. They keep renewing loans until they die, then it's tax-free after death. It's called Buy-Borrow-Die.

[dismalaf]

Buy-Borrow-Die resets the basis for capital gains tax, but then there's estate tax when the money gets passed on (exemption is only $15 million, trivial to billionaires).

[cosmicgadget]

Taxed on repaying a loan?

[dismalaf]

No, taxed when you earn the money that repays the loan. Income tax, capital gains taxes, dividend taxes, estate taxes, etc... However the money was acquired to repay the loan, a tax was applied.

[cosmicgadget]

Which is pendantically and functionally very different from the implied tax on repayment.

[dismalaf]

Maybe you didn't read it properly, I said taxed "on the income" then specified that's the money "used to pay it back".

Income has a specific definition if you want to be pedantic, and types of income are always taxed.

[reaperducer]

Can I e.g. borrow against my assets and not pay any taxes?

If you have a 401(k), yes. It's a way to turn a 25% credit card debt into a 5% loan.

The hitch is that while you can pay the credit card company over 30 years, the 401(k) loan is less than a decade, resulting in higher payments short-term, but money saved in the long term.

[eudamoniac]

This strategy is not a traditional loan with interest and regular payments. If you try to live on regular loans it doesn't make any sense. It's a scheme mostly only available to HNW people where they repay upon death in certain tax loophole ways.

[throwawaypath]

These loans still have interest and regular payments. They are not like your mortgage or credit cards, but interest and minimums still apply.

[Dig1t]

You won't pay taxes but you will pay interest. Most forms of value (real estate, gold, stocks, your car) you can borrow against in the USA, but the interest you pay almost always makes it a dumb idea.

[cosmicgadget]

I mean people get mortgages and carry credit card balances and do margin trading and get helocs. If those are taxable I might need to call the IRS.

For the uber rich it is called "buy-borrow-die".

And this is why the idea of a wealth tax has so many tres comas types up in arms.