We all love a good loophole. This list explores some of the most infamous loopholes throughout history, ranging from medieval times to the modern day. We’ll prove once and for all that successfully navigating an existing law, rule or obstacle has always been extremely satisfying throughout the generations.

10 Simple But Costly Math Errors In History

10 American Airlines

Over the years, a series of companies have been known to make a peculiar agreement with popular airlines. In exchange for a profit share of their products, certain airlines offer free air miles. This was exploited like never before in 1999 when David Phillips utilised a loophole in the offer. This loophole ultimately allowed him to purchase over a million airmiles in exchange for only $3,000 of pudding. The company, Healthy Choice, added stickers to each of their chocolate puddings which then had to be peeled off and sent in. Phillips spent a lot of time ensuring that he was technically sticking to the rules, knowing all the while he was exploiting a massive loophole. The plan was successful, but by 2005, the mastermind had spent all 1.2 million of his air miles. Still, he managed to take advantage of the situation at hand and save a small fortune in the process.^[1]

9 Moving Train

In the UK, it is legal to sell alcohol without a licence, so long as the sale is completed whilst on a train in motion. In 2018, the Tapling and Meegan Gin distillery exploited this law by purchasing a then abandoned railway building. It would then issue drivers to move the train back and forth on the track, selling alcohol to the passengers on board. This proved highly profitable, as the distillery did not have to purchase the necessary licence immediately. See, this plan was not intended to be a permanent solution. Instead it was simply a way to sell and promote their brand, whilst waiting for the paperwork to be completed that would eventually allow them to sell their product on more stable ground.^[2]

8 Gambling

Technically speaking, gambling is illegal in Japan. However, that has not prevented the residents from partaking in the pastime. By utilising a series of legal loopholes, Pachiko gambling was invented and rose to prominence. The way that the system works is that gamblers purchase a series of balls, with which to gamble and attain. Since it is technically not money that they are putting down onto the table, it does not break any law. At any point, customers can exit the establishment and exchange the balls with a separate business for cash. Since the place where the Pachiko balls and money are traded is technically a separate entity, it does not fit the legal definition of gambling. This is perhaps the cheekiest loophole, because it avoids the law so narrowly that it basically feels like it’s actually breaking the law, whereas other loopholes on this list are exploited far less brazenly.^[3]

7 Cruise Lines

From airlines to cruise lines. Thanks to a particular law in the Maritime handbook, Cruise ships can technically be exempt from most tax laws. Cruise lines have been exploiting this for years to save an absolute fortune and maintain profitability. The term that they sail under is ‘a flag of Convenience’ or FOC. A FOC allows cruise line companies to register their ship in Panama and a handful of other places such as the Bahamas, despite the fact the ship may never have even been there. Whilst this may mean more profit for those higher up, flags of convenience more notably result in low wages and inadequate living conditions for staff, since cruise lines do not have to meet the Health and Safety standards that are no doubt stricter in their home countries.^[4]

6 Pet Bear

British Poet Lord Byron was no stranger to the art of loopholes. Whilst at Trinity College between the years 1805 and 1808, the author behind ‘Don Juan’ was forbidden from bringing his pet dog to stay with him in the dorm rooms. Infuriated by this rule, he decided to protest by purchasing another animal: a living, breathing bear. Technically speaking, the college rules did not specify that the poet could not be accompanied by a bear, during his stay. This is malicious compliance if there ever was a case of it: instead of acknowledging the spirit of the rule, someone follows it to the letter. It makes sense that a master wordsmith would successfully ignore and bypass rules that he did not agree with.^[5]

10 Misconceptions About The ‘Most Dangerous’ Travel Destinations

5 Voltaire

The French writer and philosopher Voltaire found himself in many ploys over the course of his life, with one of these resulting in him becoming incredibly rich. The program that was exploited to his benefit was essentially an 18th century version of the lottery. Due to calculation issues, the prizes that were given out after every win were actually higher than what the host took in from ticket sales. This meant that all it took to make a profit was to purchase a certain amount of tickets, enough to dominate the market and ensure that they would always benefit from the pay-out. This was not one man’s plan—no, a series of mathematicians were hired to do the calculations and ensure that the scheme would not fail. Whilst the specific numbers are not known, it is understood that the group involved created a small fortune through this method.^[6]

4 Raines Law

19th Century New York attempted to crack down on Sunday drinking years before prohibition was implemented. To enforce this law, restaurants were given no choice but to sell meals to accompany every drink sold. The intention here was for people to consume food on the premises, thus ensuring that they did not drink on an empty stomach. However, the law that was titled ‘Raines law’ after its creator, Senator John W Raines, was quickly exploited, with restaurant and bar owners supplying each customer with a sandwich upon the purchase of a beverage. Before they were given a chance to consume the product, it was taken away from them and provided to the next customer. Using this system, a single sandwich would often last an entire day, without any rules or laws being broken.^[7]

3 Abandoned Purchase

A prospective homeowner once sought to purchase an expensive house for as little as possible. The amazing thing is: he accomplished just this. After analysing the law intensively, Kenneth Robinson found a Texas home that met the necessary requirements. The loophole that he exploited involved a homeowner who had failed to meet their mortgage payments and lost their home because of it. Without the mortgage to collect, the company in charge then surrendered the property, leaving Robinson to take a short trip to the local courthouse and claim ownership of the house and land. For a mere $16, he was able to take over the building after filing minimal paperwork and announcing himself as a Squatter. He got away with this scheme for 7 months before he was evicted due to not keeping to the spirit of the law. Whilst the plan was not as successful as he may have hoped, this did mean that he had paid for almost a year’s rent with less than a $20 bill!^[8]

2 Waterloo Coin

The battle of Waterloo may be one of the most notable battles in modern history. In 2016, Belgium attempted to issue a 2 Euro coin to commemorate the end of the battle, but the decision was adamantly blocked by France. They obviously did not agree with even the hint of celebration over a war they so brutally lost. In response to France’s objections, plans were changed, and the coin was instead minted to be a 2.5 Euro coin. This loophole was utilised to both accommodate France’s demands and to no doubt make somewhat of a mockery of them.^[9]

1 The Origin

The term ‘loophole’ was adopted from the thin slits that were left built into the architecture of castles, and Archers would use these slits to fire arrows at enemy forces. These holes were tremendous for the defence of a castle. The enemy could only return fire through this hole, obviously at a disadvantage, whilst the arches raining arrows on their heads from above had all the fun. It is clear how the word derived from this context, then, as taking advantage of something already there is the very nature of all legal loopholes used today. The gap also goes by the name ‘arrow-slit’ but this title would have been far less pleasing.^[10]

Top 10 Tragic Ironies

Taxes are the worst. They’re completely necessary for society, but really they are the worst. It’s rare to find someone that actually wants to pay more to the federal government. In fact, most people are always looking for ways to pay fewer taxes. Here are ten tax loopholes that you can use to help lower your tax burden.

It’s important to remember that taxes and the associated loopholes are incredibly complicated, and this article is not advice. I’m not a tax expert, so make sure you check with someone who is before trying any of these out.

10 Saver’s Tax Credit

The Saver’s Tax Credit is a credit available to low- and moderate-income taxpayers who save for retirement. The amount of the credit is 50%, 20%, or 10% of your retirement plan or IRA contribution, up to $2,000 ($4,000 if married filing jointly).

To be eligible for the full 50% credit, your adjusted gross income must be $30,000 or less. If your AGI is between $30,000 and $40,000, you are eligible for a 20% credit. And if your AGI is $40,000 or more, you are only eligible for a 10% credit.

The great thing about this tax credit is that you can take the Saver’s Tax Credit whether you itemize deductions or take the standard deduction.

9 HSA to Pay Medical Bills

If you have a high-deductible health plan, you can use a Health Savings Account (HSA) to pay for medical bills. You can make tax-deductible contributions to your HSA. The funds can then be used to pay for qualified medical expenses tax-free.

You can withdraw money from your HSA to pay for medical expenses at any time. And if you don’t use the funds in a particular year, the money can be carried over to the next year.

An HSA might be a great account to have, but it isn’t for everyone. Are you generally in good health and want to set up more of a rainy day medical or plan for your retirement? Ask yourself this question before you decide if a Health Savings Account is the right choice for you.

Benefits of an HSA:

• Tax-deductible contributions
• Triple tax savings: contributions, interest, and earnings are all tax-free when used for qualified medical expenses
• It can be used to pay for current and future medical expenses
• No use-it-or-lose-it rule: funds can be carried over from year to year

8 Bad Debt Deduction

If you have debt that you are unable to collect, you can deduct the amount of the debt as a bad debt deduction. Originally this loophole was meant just for businesses to be able to write off any bad debt they have. But thanks to the generic wording used, anyone can deduct the cost of bad debt.

To be eligible for the deduction, the debt must be an actual debt and not a gift. And you must have made a reasonable attempt to collect the debt. To be honest, this seems like a great way to cut some of the dead weight out of your life.

Here’s how to use this deduction:

• It needs to be money that was already reported in your income or was cash you had lying around.
• Once you decide the debt is worthless, no court date is required. You can take the deduction that year.
• Report it as a short-term capital loss

If you have any questions, talk to your tax preparer or accountant, and they can help get you the proper forms and proof needed to make a claim.

7 Gambling Deduction

If you like to gamble, you can deduct your gambling losses up to the amount of your winnings. It sounds like a nice way to make up for that losing weekend in Vegas to me.

The downside is that this deduction is only available if you itemize deductions. And you will need documentation of your wins and losses. And it’s possible that the deduction won’t save you any money if you don’t have a lot of other deductions.

Keep that in mind if you are considering using this deduction. You’d need to have more than $12.5K if you are single or $25.1K if you are married filing jointly.

6 Home Office Deduction

You’re not a stay-at-home parent with an Etsy shop. You are an e-commerce company with a small national team. And because you choose to be a fully remote company, part of your home is used for business purposes. You can deduct the portion of your rent or mortgage interest, insurance, and utilities that go toward running that business.

To be eligible for the deduction, you must use the area regularly and consistently for business.

Using the home office deduction can be a great way to save money on taxes. It looks like it might be time to put that guest bedroom to work for you instead of waiting for it to be used once a year by your in-laws.

Talking to a tax expert about what your business could also open the door to many other deductions. In some circumstances, even your landscaping could be deductible.

5 Try The Ol’ Roth IRA Backdoor Switch-a-Roo

If you make too much money to contribute to a Roth IRA directly, you can still get the benefits of a Roth IRA by contributing to a traditional IRA and then converting it to a Roth IRA.

This loophole is often referred to as the Roth IRA backdoor.

To be eligible for the conversion, you must hold the traditional IRA for at least five years. And you will owe taxes on the amount that you convert. Getting the benefits after five years will be worth it, though. Remember, these are the benefits you get once it’s a Roth IRA.

• Both the growth and the withdrawals are tax-free
• Your heirs can inherit the money tax-free if you do it right
• Your contributions can be withdrawn without penalties.
• Almost anyone can contribute to a Roth IRA
• No required distributions

4 Go Ahead and Write Off That Pool for Medical Reasons

Have you always wanted to have a personal pool? This might be the way to do it. First, you need to have a doctor prescribe swimming as a way to treat either a medical condition or illness. The types of illnesses and conditions that will get you a doctor’s approval are the ones that hydrotherapy treats well. These could include the following:

• Severe Arthritis
• Fibromyalgia
• Chronic Pain
• Chronic Heart Failure

Make sure that you hold onto all of the documentation since the IRS will look into it, and you will have to prove that the pool wasn’t for general exercise or personal use. If you do manage to get a prescription, then the construction costs and the maintenance costs for your pool can be deducted.

3 A Pass-Through Business

If you are self-employed, you can set up a pass-through business to reduce your taxes. A pass-through business is where the income from the business is passed through to the owner and taxed at the owner’s personal tax rate, which is usually lower.

The most common type of pass-through business is a sole proprietorship. But there are also other types, such as S corporations and partnerships. Be sure to talk to an accountant to see if setting up a pass-through business is the right move for you.

2 Give to Charity Freely—It Helps Them and You

If you donate to charity, you can deduct all or most of the amount of your donation from your taxes. Different types of charities have varying percentages that you can deduct from your adjusted gross income. For example, if you donate cash to a public charity, you can deduct up to 50% of your adjusted gross income. But if you donate property, such as a car or a boat, you can deduct the full market value of the property.

There are some things that you need to keep in mind when giving to charity, though:

• The charity must be qualified as a tax-exempt organization by the revenue code.
• You need to document all of your contributions, and if a donation is not made in cash and worth more than $5000, you have to have it appraised
• Unless you’re itemizing, you can only deduct $300 if you’re single or $600 as a couple.

1 Got My 529 Savings—Watchout Private Schools

If you have children, you can save for their education with a 529 plan. Contributions you make to a 529 savings plan are not tax-deductible. But the earnings in the account are not taxed when you pay for any qualified education expenses. Qualified education expenses include the following:

• Tuition
• Fees
• Books
• Room and board

One of the best-kept secrets of the 529 plan is that it doesn’t have to be used solely for your kid’s college. You can also use it to pay for a private school anytime from kindergarten to 12th grade. You can take out up to $10,000 for tuition per student tax-free. That’s pretty cool!