More Tax Savings Ideas
If your 2015 tax liability was higher than you’d hoped and you’re ready to transfer some assets to your loved ones, it’s time to get started. Giving away assets will, of course, help reduce the size of your taxable estate. But with income-tax-smart gifting strategies, it also can reduce your income tax liability — and perhaps your family’s tax liability overall. Consider the following:
- Gift appreciated or dividend-producing assets to loved ones eligible for the 0 percent rate. The 0 percent rate applies to both long-term gain and qualified dividends that would be taxed at 10 or 15 percent based on the taxpayer’s ordinary-income rate.
- Gift appreciated or dividend-producing assets to loved ones in lower tax brackets. Even if no one in your family is eligible for the 0 percent rate, transferring assets to loved ones in a lower income tax bracket than you can still save taxes overall for your family. This strategy can be even more powerful if you’d be subject to the 3.8 percent net investment income tax on dividends from the assets or any gains if you sold the assets.
- Don’t gift assets that have declined in value. Instead, sell the assets so you can take the tax loss. Then gift the sale proceeds.
If you’re considering making gifts to someone who’ll be under age 24 on December 31, make sure he or she won’t be subject to the “kiddie tax.” And if your estate is large enough that gift and estate taxes are a concern, you need to think about those taxes, too.
The best advice we can offer is, “Don’t go it alone.” Contact Tony Constantine, CPA at Ciuni & Panichi, Inc. today to explore tax strategies that will position you for a good tax season in 2017 and beyond at 216-831-7171 or tconstantine@cp-advisors.com.
