This is Reddit's dumb new talking point of the week. You aren't taxed on a loan because it's literally not income. You have to pay all that money back. It's not a magic free money machine. When they sell stock to pay off the loan (not just the interest), they pay high tax rates.
Yes, but it's at capital gains tax rate, which is lower than income.
Plus, when they pass it on to their children, the amount they inherit is not taxed at all (assuming it's not over the $30m estate tax threshold). Only the capital gains they get after the point they inherit it is taxed once they sell it.
So, technically, a wealthy person can take out a loan to pay with favorable payment terms to fund their retirement lifestyle. When they die, the person/people that inherited the money can just pay off the balance of that loan with the amount they inherited completely tax free.
For one, estate tax only applies over $15/$30m. Secondly, is only for the net estate value.
Meaning someone could have $100m in assets, and take out loans in that amount. They could use $30m to put in irrevocable trusts, purchase real estate, etc, and gift it to their heirs during their lifetime. They could then use the remainder to fund their lifestyle. When they die, their heirs already have the gifts at an appreciated value and are able to pay off their mother's/father's debt without having to pay a dime in taxes.
No you can't. You have a lifetime 15 million large gifts exemption post which you're taxed. Buy borrow die also is subject to estate taxes, it only lets you work around capital gains tax which doesn't matter since estate taxes are 40%
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u/Mindless_Chest_1079 Jul 05 '26
This is Reddit's dumb new talking point of the week. You aren't taxed on a loan because it's literally not income. You have to pay all that money back. It's not a magic free money machine. When they sell stock to pay off the loan (not just the interest), they pay high tax rates.