Tax planning is a year-round process, so now is a good time to think about the follow
- Are you considering making a cash gift to a relative? If so, consider making the
gift in conjunction with the overall revamping of your stocks and mutual funds
held in taxable brokerage accounts to achieve better tax results. Don't gift
loser shares (currently worth less than you paid for them). Instead, sell these
shares, recognize the capital loss on your tax return, and then gift the cash
proceeds to a relative. However, do gift winner shares to lower tax bracket
relatives (unless they are under age 24 and subject to the Kiddie Tax). The 2014
annual gift tax exclusion is $14,000.
- Are you considering making a contribution to a favorite charity? The previous
strategies will also work well for contributions to qualified charities. Sell
loser shares, recognize the loss on your tax return, and then give the cash
proceeds to the charity and claim the resulting charitable contribution (if you
itemize). Donate winner shares to the charity and deduct the full current fair
market value at the time of the gift (without being taxed on the capital gain).
The tax-exempt organization can sell your donated shares without owing tax.
- Are you self-employed? Consider employing your child in the business (but pay a
reasonable wage for their age and work skills). This practice can shift income
(which is not subject to the Kiddie Tax) to the child who is normally in a lower
tax bracket, decrease payroll taxes, and enable the child to contribute to an IRA.
- Is your estate plan current? If you already have an estate plan, it may need
updating to reflect the current estate and gift tax rules. For 2014, the unified
federal gift and estate tax exemption is a generous $5.34 million, and the rate
is 40%. Furthermore, the impact of the Supreme Court's Windsor decision and
resulting IRS changes in the federal definition of marriage mean that legally
married same-sex couples need to revise their estate plan. Plus, there may be
nontax reasons to update your estate plan.
Please contact us to discuss any tax planning strategies you are interested in implementing.
This publication is distributed with the understanding that the author, publisher and
distributor are not rendering legal, accounting or other professional advice or
opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2014