Matt Meehan is a leading finance expert & CEO of Credit Banc. He specializes in helping SMBs access credit & capital. Shield Advisory Group.
When it comes to taxes, most business owners know the basics: Write-offs, bonus depreciation, maybe some cost segregation and so on. Don’t get me wrong, they work fine. But if you’re staring down a six- or seven-figure tax bill? The basics won’t cut it.
Now, take the ultrawealthy. They use something called leveraged tax strategies. Basically, this means they know how to shift their tax bills to different years, boost deductions and generate liquidity. And no, these aren’t loopholes or gimmicks. They’re 100% legal strategies that let the wealthy keep more money in their pockets. And the good news? They’re increasingly accessible to business owners who know where to look.
If you’re ready to lower your tax bill and go beyond the basics, here are four advanced strategies illustrating how the wealthy approach taxes differently.
1. The ‘Hollywood’ Deduction
Kicking things off, we’ve got IRS Section 181. It aims to keep film and theater jobs in the U.S., and it comes with some unique tax benefits. If you invest in qualifying productions (film, TV, live theater or sound recordings), rather than amortizing costs over years, they can be deducted in the same year.
The current rules:
• Deduct up to $15 million per production ($20 million in low-income areas)
• Sound recordings qualify for up to $150,000 annually per taxpayer
• At least 75% of compensation must go to U.S. workers
• Applies only to productions that start before Dec. 31, 2025
If you’re a high earner, this unique strategy could wipe out millions in taxable income. Put $5 million into a qualified film or live theater production, and deduct $5 million from taxable income right away.
The catch? The clock is ticking, and this provision sunsets after 2025.
2. Using Life Insurance As A Private Bank
Permanent life insurance isn’t just a death benefit; it can actually be structured as a private banking system. Under IRS Sections 7702 and 72(e), overfunded policies allow cash value to grow tax-deferred, while loans or withdrawals provide tax-free access.
If you put in more than the minimum, you boost cash value. That money can then compound tax-deferred inside the policy. And if you need liquidity, you can borrow against it without triggering taxable income. Some banks will even lend against the policy, letting the same dollar work inside the contract and in outside investments.
Here are a few of the benefits:
• Tax-free growth and access to capital
• No penalties or forced withdrawals like with traditional retirement accounts
• Asset protection and estate flexibility (varies by state)
• Legacy planning across generations
This isn’t theory. Doris Christopher launched Pampered Chef with a $3,000 life insurance loan before selling to Warren Buffett’s Berkshire Hathaway corporation. And if you’re a high earner, this strategy adds flexibility and long-term control after traditional retirement accounts are maxed out.
3. Leveraged Trading Losses
Another tool for high earners is purposely creating losses in one area to offset gains in another. Yes, it sounds crazy. And no, it’s not about avoiding taxes. It’s just changing when you pay them.
Here’s what it looks like: You create and fund an entity that engages in real trading activity. Any losses generated from this trading activity flow through to your personal or business return. With leverage, you control more than the money you put in.
For example, if the trade loses, the tax loss can be bigger than your initial investment. This helps offset other gains like business sales, dividends or capital gains.
In plain English? Instead of swallowing a huge tax bill in a high-income year (where your marginal rate could be 37%), you defer it to a future year when your income (and rate) is lower.
Heads up: The IRS monitors these strategies closely. Make sure your documentation and structure are solid if you want to stand up under audit.
4. Software And Digital Asset Deductions
Software is another often overlooked tax lever. And depending on how it was acquired, you could deduct costs much faster than you think.
• Off-the-shelf software (commercial) may qualify for a full Section 179 deduction in the year it’s placed in service. Think programs like QuickBooks or Microsoft Office.
• Custom or developed software now falls under Section 174, meaning costs must be amortized over five years (if built in the U.S.) or 15 years (if built abroad).
• Licensed or subscription software (SaaS) is typically expensed right away as an ordinary business cost under Section 162.
Accelerating deductions improves cash flow and lowers taxable income during high-growth years. For fast-scaling businesses, this can make a meaningful difference.
It’s Time To Start Thinking Like The Wealthy
If you’re paying significant taxes (and most successful business owners are), there’s no reason you should stick to the basics. Production deductions, life insurance, leveraged losses and software write-offs aren’t loopholes. They’re built into the code.
The difference between overpaying and paying strategically comes down to planning. Surround yourself with advisors who understand these advanced tools, stay on top of deadlines and caps, and map out your tax forecast before the bill shows up.
You don’t have to be ultra-rich to use the same strategies. But you do need to think like they do.
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