Carried interest - profits made by private equity investment managers, hedge funds, venture capitalists, and real estate investment trusts - constitutes a major source of income for many financial professionals.
However, carried interest isn't taxed as income. Instead, it's taxed at the capital gains rate, which, at 15 percent, is considerably less than the top bracket tax rate of 39.6 percent that many of the financial professionals would pay.
Facebook reported $1.1 billion in pre-tax profits in 2012, but paid zero federal and state taxes while receiving a federal tax refund of around $429 million.
The reason is that the company took a multi-billion dollar tax deduction for the cost of executive stock options and share awards following their IPO.
In essence, Facebook was able to write off its entire federal tax obligation and more for paying its executives. This has raised the ire of a number of people in Washington, including Michigan Democratic Senator Carl Levin.
Source: CBS, Bloomberg Businessweek
In 2011 you could write-off the full cost of an SUV, provided it was used exclusively for business and weighed more than 6,000 pounds.
Since then the relevant section of the tax code — Section 179 — has been scaled back significantly, but the process still allows people to deduct the full purchase price of qualifying equipment or software if it's used for business.
Today, acceptable write-offs include taxis and vehicles that can seat more than nine passengers, have no seating behind the drivers seat, have a fully enclosed driver's compartment, or have a cargo area at least six feet in length (like a pickup truck).
As part of the TARP bailout, NASCAR owners got a huge tax gift written into the tax code. It's still around today, as it was extended for another year as part of the "Fiscal Cliff" deal.
Much like the private jet depreciation advantage, NASCAR track owners are now allowed to write off the cost of building facilities in seven years, rather than the 39 years the government estimates it actually takes for the tracks to depreciate.
This means that NASCAR track owners make their money back even faster, but the government loses $40 million each year.