Tax Question: Why do wealthy individuals pay NO federal income taxes in United States? - Qs and As


    According to a financial expert, John Proctor; The tax code is set up so that business owners can deduct financial losses from their income when they file their tax returns, so the government doesn’t end up taxing someone’s lost income.

    To pay no federal income taxes for multiple years , someone would have to lose more money in a given year than they earned. Why should someone have to pay income taxes if they didn’t earn income, but lost money instead?

    A person decides to put up $100,000 of his money to open a coffee shop, but the coffee shop completely fails and the business owner loses all $100,000.

    Assuming he has no other income, that would show up as negative $100,000 in earnings on a tax form.
    That failed entrepreneur could go without paying income taxes until he finally recoups the $100,000, because his losses can be carried over to following years.

    So if he makes $50,000 each year for the next two years, he wouldn’t pay income taxes until he started earning again in the third year.

    By doing, this encourages entrepreneurs / business owners to start business and take risk by providing relief for potential losses..


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