Tax Break That Benefits Wealthy Investors

Tax Breaks That Benefit Wealthy Investors

Income inequality has been a hot topic in the news lately. Many people are outraged that the wealthiest Americans pay a lower tax rate than middle-class workers. While there is no easy solution to this problem, one way to help level the playing field is by taking advantage of tax breaks that benefit wealthy investors. In this post, we will discuss 5 such tax breaks and how you can take advantage of them!

Tax Breaks That Benefit Wealthy Investors

Tax breaks are often used by wealthy investors to minimize their tax liability. While some tax breaks are available to all taxpayers, others are only available to those who earn a high income. Here are five of the most common tax breaks that benefit wealthy investors:

#1 The Capital Gains Tax Exclusion

  • The capital gains tax exclusion allows investors to exclude a certain amount of their capital gains from taxation. For example, if an investor has a capital gain of $10,000, they can exclude $3,000 of that gain from taxation.
  • This exclusion reduces the tax bill of the investor, and it disproportionately benefits wealthy investors. The thing about capital gains is that they’re more likely to happen when an individual has plenty of money invested, like with stocks and real estate.
  • The carried interest loophole and other tax breaks for wealthy individuals often come hand-in glove with the exclusion. As a result, the capital gains tax exclusion is a major contributor to inequality in the United States.

#2 The Deduction For State And Local Taxes

  • The deduction for state and local taxes, also known as SALT, is a tax break that can be used to lower Tax Breaks That Benefit Wealthy Investorsyour overall tax bill. The deduction allows you to deduct the amount you paid in state and local taxes from your federal taxable income.
  • This deduction is beneficial for taxpayers who live in states with high tax rates, as it can significantly reduce their federal tax liability. The vast majority of people don’t use the tax break, as it only benefits those with high incomes and expensive homes.
  • This means that the vast majority of taxpayers who claimed the deduction benefited from a sizable tax break. While the SALT deduction can provide significant tax relief for some taxpayers, it primarily benefits wealthy investors and does little to help middle-class families.

#3 The Mortgage Interest Deduction

  • The mortgage interest deduction is a tax break that allows homeowners to deduct the interest they pay on their mortgage from their taxable income. This deduction is available to both primary and secondary homeowners, and it can significantly reduce the amount of taxes owed.
  • However, the mortgage interest deduction is primarily claimed by upper-income taxpayers. Nearly 80% of the benefit goes to households with incomes in the top 20%. This is because the deduction is based on the interest rate, which is generally higher for more expensive homes.
  • As a result, the mortgage interest deduction disproportionately benefits wealthy investors who can afford to purchase more expensive homes. While this deduction does provide some benefit to middle-class homeowners, it is primarily a tool for wealthy taxpayers to reduce their tax liability.

#4 The Deduction For Charitable Donations

  • The deduction for charitable donations is a tax break that is available to taxpayers who itemize their deductions. This deduction allows taxpayers to deduct the fair market value of their charitable donations from their taxable income. The deduction is available for cash donations and donations of property, such as stocks, bonds, and real estate.
  • The amount of the deduction depends on the fair market value of the donation and the taxpayer’s marginal tax rate. The deduction is only available to taxpayers who itemize their deductions; it is not available to those who take the standard deduction.
  • The deduction for charitable donations is a significant tax break for wealthy investors. Thus, the deduction for charitable donations disproportionately benefits wealthy taxpayers. The charitable donations of the wealthy may go unnoticed, but it’s not surprising given their large tax savings.

#5 The Foreign Earned Income Exclusion

  • FEIE is a break that allows taxpayers to exclude a certain amount of income from their taxable Tax Breaks That Benefit Wealthy Investorsincome. This exclusion applies to taxpayers who earn income from foreign sources. And it can be a significant benefit for those who have high incomes.
  • However, the exclusion is not available to all taxpayers. To qualify, taxpayers must meet certain requirements. This includes having a tax home in a foreign country and being physically present in that country for at least 330 days during 12 months.
  • For many people, the FEIE provides a major tax break that can save them thousands of dollars each year. However, because it is only available to those with high incomes, it is often criticized as a break that benefits only the wealthy.


Tax breaks for the wealthy are nothing new, but they can be extremely valuable in helping you build wealth over time. By taking advantage of the many tax breaks available, you can put yourself in a better position to reach your financial goals. Have you started investing yet? If not, now may be the time to get started. Thanks for reading!

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