Not to Early to Plan for Tax Savings
New York, NY — June 14, 2023
While tax season is officially over, it is not too early to start thinking about your plans for 2023. Perelson Weiner is recommending some tax-saving ideas that can minimize your liabilities for the current year and beyond. You may already be taking advantage of some of the suggestions below. If not, please consider them in your overall planning strategy.
Using appreciated investment assets instead of cash when making philanthropic gifts to obtain both a tax deduction for the fair market value of the asset AND to eliminate income taxes on a future sale.
Using required minimum distributions for IRAs and 401ks to fund charitable donations for those who are unable to, or do not want to, use appreciated property.
Clients with large passive loss and foreign tax credit carryovers need to have a plan to use those losses and/or credits as they expire when the owner passes.
Clients with Grantor Retained Annuity Trusts (GRATs) should consider substituting cash, bonds or other less appreciated property for highly appreciated trust assets. Appreciated assets remaining in GRATs will not receive a stepped-up basis at death.
For those clients who also have large capital loss carryovers, realizing trust capital gains and repurchasing the same position at a higher tax basis, using those capital loss carryovers that might otherwise be lost at death, should be considered.
The home mortgage interest deduction is limited. Clients with sufficient assets should consider reducing non-deductible home mortgage interest expense to amounts which provide a full tax deduction. Assets used to pay down mortgages may be replenished by borrowing and then purchasing investments, resulting in deductible investment interest expense.
Individual clients with substantial amounts of self-employment and/or other types of income not held in flow-through entities and residing in high state income tax locations can add a partner and establish a pass-through entity and pay state taxes which could result in those taxes being deductible for federal purposes.
Qualified profit sharing and pension plans should always be considered to defer income taxes, as should Roth IRAs and 401ks to avoid future income taxes by paying the tax today and having the invested assets grow without being subject to income taxes. Section 529 plans for family members' education are effective options to defer and eliminate income taxes.
Perelson Weiner is a full service Certified Public Accounting and consulting firm dedicated to serving the needs of successful entrepreneurs, high net worth individuals and families and international companies doing business in the United States. Perelson Weiner LLP is a member of the Center for Public Company Audit Firms and the Private Company Practice Section of the American Institute of Certified Public Accountants (AICPA). The firm is a member of PrimeGlobal, the third largest association of independent accounting firms in the world, comprised of over 350 highly successful independent public accounting firms in 90 countries.