How Nvidia CEO Jensen Huang is avoiding US$8 billion in taxes

Jensen Huang who is the 61-year-old co-founder and CEO of Nvidia and is the 11th richest person in the world, with a net worth of USD 126.5 billion. When estates reach such a large value, the U.S. federal government typically imposes estate taxes of 40%, which could exceed $50 billion in Huang’s case.

However, Huang has strategically arranged his finances to pass on much of his wealth while minimizing his tax liability, potentially avoiding as much as $8 billion in estate taxes, according to tax filings reviewed by The New York Times (NYT).

Huang's approach is not unique, but it illustrates how the ultra-wealthy often avoid estate taxes. The estate tax, originally introduced in 1916 to curb inherited wealth, has become less effective over time due to changes in tax laws and the use of loopholes by the rich. Since the early 2000s, the estate tax has contributed very little to federal tax revenue. If the tax had kept up with the growth of wealthy estates, it could have raised around USD 120 billion last year. However, it only generated a fraction of that amount.

According to Daniel Hemel, a tax law professor at NYU, approximately USD 200 billion is passed on every year without paying estate taxes, thanks to strategies like trusts and smart financial planning. These tactics are often recommended by expensive legal and financial experts who navigate complex tax rules, court decisions, and IRS guidelines. "You have an army of well-trained, brilliant people who sit there all day long, charging USD 1,000 an hour, thinking up ways to beat this tax," said Jack Bogdanski, a law professor at Lewis & Clark Law School.

Huang's tax strategy has garnered attention for its sophistication. In 2012, he set up an irrevocable trust with 584,000 shares of Nvidia, which were worth USD 7 million at the time. This trust is part of a larger financial strategy called "I Dig It," validated by the IRS in 1995. It allows Huang to avoid both estate and gift taxes on assets that appreciate in value after being transferred.

By 2023, the value of Huang’s trust had grown to over USD 3 billion. Without this strategy, his heirs would face a tax bill of more than USD 1 billion. In 2016, Huang and his wife, Lori, further reduced their tax burden by establishing grantor-retained annuity trusts (GRATs). This allows assets to be passed to beneficiaries without estate tax if their value grows beyond what is paid back to the grantor. These shares have now appreciated to a value of over USD 15 billion.

Additionally, Huang has made substantial donations to his charitable foundation, the Jen Hsun & Lori Huang Foundation. By donating Nvidia shares, Huang receives immediate tax deductions, reducing both his income and estate taxes. These financial moves show how the wealthy use legal strategies to minimize their tax obligations while preserving their wealth for future generations.