Many
people are under the misguided impression that the tax law in the United States
is perfect. However, that’s definitely not the case. There are some glaring
loopholes within the tax law.
When
we say “loophole,” we are talking about provisions that exist in the tax code
for reducing tax liability. Most of these provisions were designed for real and
legitimate reasons, but that does not stop others from taking advantage of them
or using them in unintended ways. Others, however, were designed solely with
the intention of helping taxpayers, which is nice to know.
Some
of these loopholes deserve being explored.
The
Carried Interest Loophole
This
glaring loophole most often benefits hedge fund managers, private equity
partners, and venture capitalists. Through it, you can enjoy having any
compensation you earn taxed at a lower rate than the regular income tax rate.
This happens because of the “long-term capital gains rate.”
The
Home-Sale Exclusion Loophole
Another loophole applies to those who sell their home and
end up making a profit. These people won’t owe capital-gains taxes on the first
$250,000 (if single) or $500,000 (if married filing jointly) they earn in
profit. Most people aren’t earning this much for their home anyway, so it’s
safe to say that the vast majority of people who sell their homes can benefit
from this loophole.
The Earned Income Tax Credit Loophole
Some people who fall below a certain income can take
advantage of the “Earned Income Tax Credit” loophole, which allows them to
reduce their tax bill. This credit is refundable, meaning people can even end
up earning money from the IRS if the math plays our right.
As you can see, lots of tax loopholes do exist, and some are
definitely worth taking advantage of. To learn more about these or other
loopholes and how to use them to your benefit, speak with a tax professional.