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When most people think of tax savings, they picture deductions for mortgage interest, charitable giving, or retirement accounts. But there’s a hidden side of the tax code—legitimate loopholes and lesser-known write-offs—that savvy taxpayers use to slash their bills. Use them wisely and legally, and you can keep more of your hard-earned money. Use them carelessly, and you might end up paying penalties or drawing IRS attention.

For informational purposes only, not financial or tax advice. Results may vary. Please read our full disclaimer at the end of this article.

Below are real loopholes and strategies you can consider. Always consult a tax professional before using any of them.

1. The “Buy, Borrow, Die” Strategy

This may sound exotic, but it’s a favorite among high-net-worth families and those planning multi-generational wealth transfers. The steps are:

Buy assets (often stocks, real estate, or business interests) and let them appreciate. Borrow against those assets rather than selling them — the loan proceeds aren’t taxed as income. Maintain the assets until death, where heirs receive a “step-up in basis,” wiping out capital gains tax on the appreciation.

Because the loan isn’t income and the gains vanish on death, taxes can be avoided in several layers. This strategy has been highlighted in reports from the D.C. Fiscal Policy Institute (dcfpi.org, article: “How Wealthy Households Use a Buy-Borrow-Die Strategy to Avoid Taxes”).

2. Carried Interest — The Private Equity Sweet Spot

Many private equity and hedge fund managers earn a large part of their compensation through “carried interest.” Instead of being taxed as ordinary income (which can reach 37 percent), that portion is taxed as a long-term capital gain, which has a lower top rate (20 percent plus the Net Investment Income Tax).

This legal loophole means some of the richest people in the U.S. pay lower tax rates than many salaried workers. The advocacy group Americans for Financial Reform has called repeatedly for Congress to close this loophole (ourfinancialsecurity.org, blog post: “Congress Should Close Wall Street Tax Loopholes, Not Offer More Breaks for Billionaires,” 2025).

3. New Vehicle Interest Deduction (2025–2028)

Thanks to the recent “One, Big, Beautiful Bill” signed into law, beginning in 2025 individuals may deduct interest paid on a loan used to purchase a qualified new vehicle. The maximum deduction is $10,000 annually, subject to income limits. This applies only to new vehicles, not used ones, and only to the loan interest.

This was outlined directly by the Internal Revenue Service (irs.gov, press release: “One Big Beautiful Bill Act: Tax Deductions for Working Americans and Seniors”).

4. Standard Deduction Increases & Inflation Adjustments

While not as flashy as loopholes, yearly inflation adjustments are a quiet way the code gives everyone a break. For 2025:

The standard deduction is rising to $15,000 for single filers. Tax bracket thresholds are also moving up, which reduces “bracket creep.”

This information comes directly from the IRS newsroom (irs.gov, “IRS Releases Tax Inflation Adjustments for Tax Year 2025”).

5. Charitable Deductions & Income-Shifting Gifting

Charitable giving can be more powerful than many people realize. Some strategies include:

Donating appreciated stock instead of cash, which avoids capital gains tax while still giving a full deduction. Using Donor-Advised Funds (DAFs) to claim the deduction today but decide later where the donation goes. Taking advantage of the IRS annual gift exclusion, which has increased to $19,000 per person in 2025, to shift investment growth into the hands of lower-bracket family members.

NerdWallet’s tax guide (nerdwallet.com, article: “Tax Deductions You Can Still Claim”) explains how these work in practice.

6. Real Estate Depreciation Advantages

Real estate remains one of the most tax-favored investments. Investors can:

Deduct depreciation on rental properties, reducing taxable income while property values often rise. Use “1031 exchanges” to defer capital gains by rolling profits into another property. Apply cost segregation studies to accelerate depreciation of parts of the building like plumbing or electrical systems.

These strategies are frequently cited in guides to tax loopholes, including Time Analytics Software’s breakdown (timeanalyticssoftware.com, “Common Tax Loopholes Explained”).

7. Abusive “Loopholes” to Avoid

Not all loopholes are safe. The IRS has announced crackdowns on abusive partnership transactions and basis-shifting schemes that lack real economic purpose (irs.gov, “IRS Announces New Steps to Combat Abusive Use of Partnerships,” 2025).

For example, the Wall Street Journal reported on a dentist indicted for hiding millions using an abusive trust shelter (Wall Street Journal, “Dentist Indicted for Abusive Trust Scheme,” 2025). These types of moves can lead to audits, penalties, and even criminal charges.

Rule of thumb: If a tax “strategy” sounds too good to be true, or requires dozens of shell entities, it probably is.

How to Use These Strategies Safely

Work with a qualified tax professional. Keep careful documentation of every deduction and transaction. Base your strategy on actual IRS guidance and mainstream sources, not rumors. Don’t push into “gray areas” just because someone promises big refunds. Stay current — Congress changes the rules often.

Final Word

Tax loopholes aren’t just for billionaires. Many of the strategies above—vehicle interest deductions, charitable gifting, depreciation, and gifting—can work for middle- and upper-middle-class households too. The difference is how aggressively you push them.

Use them wisely, keep records, and stick to what’s clearly supported by IRS guidance and reputable sources. Done right, these tax moves could save you thousands of dollars while keeping you firmly on the right side of the law.

Disclaimer: The information provided on this article is for educational purposes only and should not be considered financial, tax, or legal advice. Always consult with a licensed financial or tax advisor for advice tailored to your financial situation. Results may vary, and ThriveLifeHQ does not guarantee any specific financial outcomes.