According to Dartmouth Town Collector Gary J. Carreiro, Fiscal Year 2020 first and second quarter real estate and personal property tax bills have all been

How do the wealthy minimize their tax burden in the U.S.?

Wealthy people in the USA minimize their tax burden by following, to the extent possible, the incentives and disincentives of Tax Law in the United States of America, just like everybody else. That is to say, the law (i.e. the Congress and the state legislators) is telling you (and everyone else) to:

  • Invest as much as possible for the long term, and earn income from capital gains which are subject to the (lower) capital gains tax, rather than the income tax. Look for return on investment in capital appreciation rather than dividends or other regular distributions.
  • Don’t keep physical cash around, because inflation sucks.
  • Leave as little cash in retail bank savings accounts as possible (i.e. just enough for your daily/weekly/monthly living expenses), because interest income is taxed at income tax rates. And inflation sucks! (banks never pay enough interest to beat inflation).

    As much of your money as possible should be invested in long term investments.

  • Don’t earn wage income, because that’s taxed at income tax rates, and is subject to FICA payroll taxes, too.
  • If you must earn a wage, take the after-tax proceeds, spend as little as you can (spending gets hit with sales tax), and invest, invest, invest. When your investments are large enough that you can happily live off your capital gains (less capital gains taxes), quit your W-2 job. See also Here’s the difference between working for your money and having your money work for you.
  • Reduce your taxable wage income as much as possible with tax deductions, e.g. max-out your 401(k) Retirement Plans contributions. Prefer to work for a company that will match 100% of your 401(k) contributions. This is more long term investment.
  • If you’re working for a pre-IPO startup, take as little cash compensation as you can (just enough for your living expenses), and as much equity compensation as you can negotiate (preferably Incentive Stock Options), provided that you believe in the probabilities of success of your employer. You’re investing in your employer’s company with your labor (hence “sweat equity”) if you do this, and the return on investment, if properly done, gets taxed at capital gains tax rate, rather than at the higher income tax rate … if the company succeeds (yes, this is taking an investment risk).
  • Live in a state with low total state taxes. Every state has some taxes (typically some combination of income, sales tax, and property tax), but the totals vary widely.

    Naturally, the governments of really pleasant, attractive places to live (e.g., San Francisco, New York City) will have higher taxes because they know that’s what the market will bear (though they do overreach with regularity) – that’s the tradeoff you make by living in such a place.

  • Buy a house (real estate), and keep a mortgage loan out on it so you can deduct the interest on the mortgage loan from whatever income you do earn (i.e. the mortgage interest tax deduction). Be sure to buy in an area likely to see economic growth and thus appreciating real estate values (e.g., not Detroit, MI).

    While generally true, sometimes real estate market conditions make renting more economically rational than buying – do the “rent vs. buy” calculation.

    Further, remember that buying a house reduces, to some extent, your economic mobility (i.e. it’s harder to move someplace else to take a better, more remunerative job), depending on the liquidity of the housing market you buy in (if it’s hard to sell at a good price, it’s hard to leave).

  • Invest in tax-free government bonds (e.g. “municipals”) because the profligate government needs to borrow your money. The yields (interest paid) on these bonds are lower, because the total effective return is increased by their returns not being taxable. However, watch out for credit risk – government entities do default on their bonds from time to time which is why they all have Credit Ratings, even the Federal Government of the United States.

    There is no such thing as a “risk-free” investment.

  • Do contribute to non-profit charities – you can deduct some of that from your income subject to income taxes. Also, it’s better to support private charities by charitable giving because they’re more efficient & effective deliverers of services to the poor than their government competitors. They have to be better, because you’re not forced to donate to them, and if you’re not convinced they’re doing good, you can stop supporting them at any time.
  • Don’t smoke Cigarettes, Cigars or consume other Tobacco products – they’re taxed pretty heavily via Pigovian Taxes (Sin Taxes) (a.k.a. “sin” taxes). Alcoholic Beverages also tend to be heavily taxed to discourage overconsumption (Alcoholism).
  • Buy as much stuff via mail-order and Internet from out-of-state vendors, thus legally avoiding sales tax and illegally evading your state’s “use tax” (equivalent to the sales tax, generally … if your state has a sales tax; some don’t, e.g. Oregon (state)) just like everyone else does, because (except for vehicle registrations) the states have no enforcement mechanism available to them to collect use taxes (i.e. it’s illegal for them to open your mail and see what you’re buying because of the Fourth Amendment, and the Interstate Commerce Clause of the Constitution).

    Unfortunately, this bullet point of Personal Finance has been blown up by the 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, and states are rapidly moving to collect sales tax on out-of-state purchases (and online/mail-order vendors are moving to comply). The window has not yet completely closed, but it is closing.

Ask any accountant, “what is the government telling me to do, and not do, in the tax laws?” and s/he’ll tell you all this stuff, and more.

See also Why should wages be taxed higher than capital gains? Doesn’t lower capital gains tax induce asset inflation rather than help the economy?