Why The Rich Pay Less in Taxes

taxes, money, and downward arrow

  • In 2018, the working class American paid a higher percentage of income tax than the rich. Billionaires only paid about 22% in federal income taxes while the average American paid 28%. 
  • Only 10% of billionaires’ income comes from their salaries. The other 90% comes from assets like real estate investments, stocks, and bonds.
  • Join Ark7 and access capital gains tax to keep more of your money. Think like a billionaire and make the most of your hard work.

You work hard to make money and provide for your household. With each paycheck, taxes are deducted. These government mandated taxes sustain federal programs and upkeep for the country. You’d expect that all citizens pay around the same percentage of their various incomes, right? But of course, this isn’t the case.

graph showing tax differences

In 2018, the working class paid a higher percentage of income tax than the rich. Billionaires paid about 22% in federal income taxes while the average American paid 28%. How is this possible?

The answer is in tax forms and sources of income.

capital gai

 

Income tax vs. capital gains tax

What you earn at your salaried job is called ordinary income. Most of the time this is one’s main source of income. In contrast, only 10% of billionaires’ income comes from their salaries. The other 90% comes from assets like real estate investments, stocks, and bonds. These are taxed as “capital gains” instead of an income tax. The capital gains tax is a much lower tax than the standard income tax and allows billionaires to keep more of their income. 

For example, let’s say Cindy earns $1M a year from her job. John earns $1M, but with only 20% from his salary, 30% from real estate investments, and the other 50% from stocks and funds. After taxes, Cindy would earn less actual take-home income after taxes than John will.

So, how can the rest of us non-billionaires get a piece of the tax break? The answer to save money is simple: invest. 

 

Choosing an investment

It’s wise to pick a stable investment when aiming for long-term financial gain. One of the most stable investments historically is real estate. Some people begin investing with the traditional buy and sell/rent option, but this takes a lot of time, money, and effort on your part. Furthermore, it only allows you to focus on a small number of properties. Another option is to turn to REITs (Real Estate Investment Trusts). You can invest in REITs through some public offerings as well as some private REITs, and you can potentially expect an annualized return of almost 7%.The downside of this approach is that not only do you lack control in your invested property’s management, but you also pay extra fees included with REITs that cut into your profit. 

All of these problems are solved with Ark7’s online investing platform. Ark7 offers fractional real estate investment in the hottest locations. There is no minimum investment so even if you aren’t a millionaire, you can still access amazing tax benefits. You’ll earn passive income because we manage the property and its tenants for you. We have your best interests in mind since we  invest in up to 10% of every property. Think like a billionaire and make the most of your hard work—invest on Ark7 to access capital gains. 

Some taxation details: on Ark7 you invest in the properties themselves (each property has its own Series LLC). You’ll receive a Schedule K-1 that considers the company’s losses and gains as your own. This means that you’ll be taxed only once for your earnings based on the number of shares you own. In addition, losses carry over yearly so they’ll be subtracted from the following year’s income. This will save you money on your gains because the IRS views your income as your total income minus the losses from years past.

Ready to begin investing and make the most of your returns? Make an account on Ark7 to browse properties in Berkeley, Seattle, and Austin. Learn from billionaires’ tactics and begin investing today. 

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