How Millionaires Use Legal Loopholes to Erase Debt—And You Can Too

If you’re a millionaire, congratulations, you have made it, and you should only be thinking about what to do with all of your hard-earned money. Of course, if you are a millionaire, you also have to deal with the reality of not just having enough money, but also how much of this money you are going to be sending Uncle Sam in taxes. 

The good news for millionaires is that the “system” is stacked in their favor, so there are plenty of legal loopholes. This includes how to smartly erase debt, something that far too many millionaires take advantage of and too few “regular” people do not. The good news is that none of these loopholes were designed to be used only by the rich, so everyone should be taking advantage of them. 

Legal Loophole Or Scam? 

First and foremost, it’s important to understand exactly what a legal loophole is versus what might be construed as a scam. A legal “loophole” as traditionally defined is an opportunity, either through tax law, banking regulations, or some other aspect of the financial system, that someone can use to improve their financial position. 

The thing is, millionaires aren’t trying to break any laws, and they certainly aren’t trying to scam anyone. They are hiring lawyers and experts to help them exploit every loophole. Traditionally, a scam would involve some type of fraud or fraudulent behavior, which is not what is happening here. 

In other words, millionaires are doing everything in plain sight and taking full advantage of what the IRS allows without hiding money offshore or falsely filing some document. Millionaires get away with this because they have lawyers and financial experts who already know these loopholes and how to take advantage of them legally. 

The First Loophole

This might involve taking advantage of a 0% credit card promo to transfer your balance so you don’t have to pay interest on the credit card you spent money on. In other words, millionaires, or just about anyone, including a hundredaire, can stack balance transfer offers together and rotate high-interest credit card debt through 0% credit card transfer offers without ever paying any interest. 

Let’s say you have $10,000 in credit card debt and find a credit card offering a 3% balance transfer fee and a 0% APR on balance transfers for 15 months. This means you can transfer your $10,000, which you were paying 20% interest on, to a card. 

Over the next 15 months, you save as much as $2,000 in interest, even after paying a $300 transfer fee. This means your net savings over 15 months are $1,700, which is very much a very legal loophole to take advantage of. This works time and time again, and plenty of credit cards offer 0% APR transfers between 12 and 18 or even 21 months. 

Loophole Number Two 

Another advantageous loophole a millionaire can use is a home equity line of credit, otherwise known as an HELOC in the industry. Millionaires use these to consolidate their high-interest debt at a lower rate, giving them tax benefits. As a HELOC often lets you take as much as 85% of your home’s equity, you can pay off your high-interest debt. 

Let’s say you have a home worth $500,000 and owe around $200,000 on your mortgage, which means you can access 85% of the difference between your home’s value and mortgage amount. At 85%, this allows you to borrow as much as $255,000 as a HELOC, which are currently averaging around 8.14% as of May 2025. However, you might be able to find these lower as Bank of America is currently offering an introductory rate of 6.49% for 6 months before it goes up to 8.9%. 

Now, let’s say you are a millionaire paying 20 percent or more on a credit card debt or have other high-interest debt for purchases you have made, all of this can be consolidated. A millionaire, or you, could utilize this HELOC loan amount, pay off all of your existing debt, and then have just one single, low-interest payment that can give you as much as 10 (in some cases, 20) years to repay. 

Not only are you saving thousands in interest over the high-interest debt you are paying off, but you can also use HELOC loans for tax-deductible reasons, like doing home improvements. In other words, there are even more loopholes available that you can play with beyond just consolidating debt. 

The Third Loophole

Often considered the best friend of the self-employed individual, write-offs are something millionaires and you can all take advantage of. As long as this is done smartly, often with the advice and counsel of a certified public accountant, you can utilize loopholes to reclassify personal expenses into business deductions to lower your taxable income. This would give you more free cash to pay off your debt. 

Of course, this has to be done within IRS guidelines, otherwise, it can quickly become fraudulent, but it is something millionaires have taken advantage of for a while, and you should also. 

For example, if you are a freelance writer who runs a side hustle at home, you can deduct a portion of your home used as office space, internet, a smartphone bill, or even the cost of purchasing new computer equipment like a laptop or monitor. 

If you are a freelancer writer earning $50,000 annually, you could find opportunities to take as much as $10,000 off in expenses, which means your taxable income is now $40,000. This would save you approximately $2,200 in taxes, which could be used toward credit card or other debts. 

It’s essential to do this smartly and again with the advice of a professional, so that you don’t find yourself in a legal situation where you don’t have the money to pay a fantastic lawyer. 

Fourth Loophole Opportunity 

The hope is that we all have enough disposable income to give money to charity, but for millionaires, it’s more of a loophole than about giving out the goodness of their hearts. Otherwise known as a “Donor-Advised Fund,” this is a popular way to find some tax advantages. 

A DAF (donor-advised fund) is good for regular people and millionaires. It allows you to donate money, claim a tax deduction, and later determine which charity will receive it. 

In other words, you can make a $10,000 donation to a Fidelity Charitable DAF in 2025, which means you can deduct $10,000 from your taxable income. This means you’re likely to save around $2,400 in taxes if you are in the 24% tax bracket, $2,200 in the 22% tax bracket, and so on. 

Another opportunity is to donate appreciating assets, like millionaires do with stocks, which can be even more advantageous. If you bought a stock worth $15,000 using $5,000 and donated it to a DAF, you can now deduct the capital gains tax. Vanguard and Charles Schwab are two examples of companies that do this successfully. 

For millionaires, the best scenario is to make these donations when they know they have a higher income. This might help them avoid being moved into a higher tax bracket because they earned more than they did in the previous years. The IRS allows cash donation deductions of up to 60% of AGI (adjusted gross income), so it’s a perfectly legal loophole everyone can take advantage of. 

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