Billionaires spend millions on tax teams to minimize their tax burden, but you don’t need their resources to benefit from the same strategies. After becoming a multimillionaire by age 26 and coaching countless business owners, I’ve discovered that these powerful tax approaches aren’t just for the ultra-wealthy—they’re accessible to ambitious entrepreneurs at various stages.
What separates the financially savvy from everyone else isn’t just income—it’s strategic tax planning. While most people complain about taxes, the wealthy take action. Here are five billionaire-level tax strategies I’ve personally used that you can implement too.
The Real Estate Professional Designation
This first strategy was my personal game-changer in my twenties. By qualifying as a Real Estate Professional (spending around 750 hours annually on real estate as your primary income source), you unlock unlimited depreciation write-offs against all your income.
I used this approach to pay almost zero income tax while controlling millions in real estate with just 20% down payments. The tax code rewards real estate investors who actively participate in property management or development. This isn’t about gaming the system—it’s about aligning your business activities with tax-advantaged categories.
Reclassifying Active Income to Passive Income
Setting up an S Corporation allows you to take a reasonable salary while receiving the rest as distributions. This simple restructuring can save you between 2.9% and 15.3% in self-employment taxes, depending on your income level.
For determining a “reasonable” salary, research median salaries for your role (tools like ChatGPT can help with this research). This strategy provides immediate tax savings without complex planning—I’ve seen clients save tens of thousands annually through this approach alone.
The Augusta Rule: Tax-Free Income
Section 280A of the tax code contains what’s known as the Augusta Rule, allowing you to rent your home to your business for up to 14 days per year. The business gets a deduction, and you receive the income completely tax-free.
Use this for:
- Board meetings
- Strategic planning sessions
- Team gatherings
- Content filming
The key is proper documentation. This strategy creates a win-win: your business gets a legitimate deduction while you receive tax-free income. I’ve personally used this to convert what would have been taxable income into completely tax-free cash flow.
Borrowing Against Assets
This is the cornerstone of Warren Buffett’s personal tax strategy and explains why he famously pays a lower tax rate than his secretary. There’s no tax on borrowed money, even when you borrow against appreciating assets.
By borrowing against your stock portfolio, real estate, or business equity at low interest rates, you can access cash without triggering taxable events. Meanwhile, your underlying assets continue to grow. This approach requires having significant assets, but it’s how the wealthy access liquidity without selling and creating taxable gains.
Step-Up in Basis for Generational Wealth
The final strategy focuses on long-term family wealth preservation. When you die, your heirs receive assets at their current market value, not what you paid for them. This means a $100,000 investment that grew to $400,000 passes to your heirs with zero capital gains tax.
This powerful provision in the tax code allows wealth to transfer between generations without the erosion of capital gains taxes. It’s why wealthy families can maintain and grow their wealth across multiple generations.
These strategies aren’t about avoiding taxes—they’re about understanding the incentives built into our tax system and aligning your financial activities accordingly. The tax code is essentially a series of incentives designed to encourage certain economic behaviors, from real estate investment to business formation.
I’ve used every one of these approaches personally and with my clients, saving millions in taxes legally and ethically. The difference between paying high taxes and optimizing your tax situation isn’t about how much you make—it’s about how you structure your income, investments, and business activities.
Don’t wait until you’re a billionaire to implement billionaire tax strategies. Start incorporating these approaches now, and you’ll build wealth more efficiently while keeping more of what you earn. The most powerful tax strategies aren’t secrets—they’re simply underutilized by those who haven’t taken the time to learn them.
