Avoiding Taxes By Powers of 10
Savvy strategies from $1 to $1 billion
Here’s what you can do to avoid taxes at every order of magnitude.
$1–10
1-digit: sign up for Robinhood to get a reward worth $5–200. Invest it in the Alpha Architect 1–3 Month Box ETF (BOXX), the most tax efficient place to park your cash for low volatility yield.
$10–100
2-digits: instead of donating US dollars, donate appreciated bitcoin. I’ve kept 10% of my cash allocation in BTC for many years, so sit on capital gains that I can extinguish by donating to a charity. My favorite charity, Watsi, takes BTC here.
$100–1,000
3-digits: instead of gifting money to your kids, lend them money at the AFR which is currently as low as 4.16%. You can set up a family bank so that for every $100, you can lend $2.403.85 for them to buy securities and can gift the $100 of required interest payments. This lets them participate in offerings and minimizes estate taxes.
$1,000–10,000
4-digits: max out your IRA. Robinhood Gold pays a 3% match or $30 for every $1,000 you deposit. $6,500 cap; $7,500 when you’re 50 and older.
$10,000–100,000
5-digits: max out your 401(k). Contribute $23k and an additional $7,500 when you’re 50 and older.
$100,000–1,000,000
6-digits: max out a 529 with yourself as the donor and beneficiary. My favorite is Nevada; you can contribute $500k.
$1,000,000–10,000,000
7-digits: switch from any S&P 500 (SPY) ETF or index fund to direct indexing. You can start with as little as $20k, it costs 10 bps/year, and automatically harvests tax losses. A $1 million investment from late 2021 to last month would have harvested almost $217,000 of tax losses.
$10,000,000–100,000,000
8-digits: set up a Private Placement Life Insurance (PPLI). Investment returns inside the PPLI grow tax deferred. The death benefit paid out to beneficiaries is income tax free. For an additional tax benefit, put the PPLI in an irrevocable life insurance trust (ILIT) to remove it from your estate and avoid estate taxes. It is bother and expense but 100% worth it >$10 mil.
$100,000,000–1,000,000,000
9-digits: roll money with a big capital gain in to a Qualified Opportunity Fund (QOF) and hold it for a decade. Capital gains on the initial QOF investment are deferred and capital gains earned from the QOF investment itself are tax exempt.
$1,000,000,000 and beyond
10-digits: sadly not yet my problem, but at this point optimize your tax jurisdiction and run hobby expenses though a nominally profit seeking business. An American willing to expatriate might find better tax statuses internationally. I like Switzerland, Singapore, and Bermuda. At least move to a tax friendly state such as Wyoming or as of 2025 New Hampshire.
Then run your hobbies through a nominally for profit business whether it is horse racing or professional sports. Buy a racehorse or sports franchise and deduct all expenses, even those you’d otherwise have anyway. Even as a billionaire, personally stay asset light to minimize liability and taxes.
