If your 2015 tax liability is higher than you’d hoped and you’re ready to transfer some assets to your loved ones, now may be the time to get started. Giving away taxable 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:
1. Gift appreciated or dividend-producing assets to loved ones eligible for the 0% rate.
The 0% rate applies to both long-term gain and qualified dividends that would be taxed at 10% or 15% based on the taxpayer’s ordinary-income rate.
2. 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% rate, transferring assets to loved ones in a lower income tax bracket than you and your family can still save on your 2015 taxes. This strategy can be even more powerful if you’d be subject to the 3.8% net investment income tax on dividends from the assets or if you sold the assets.
3. Don’t gift assets that have declined in value.
Instead of gifting assets that have declined in value, sell them so you can take the tax loss. Then gift the sale proceeds.
Note, 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” (or investment income that is taxes at their parents’ tax rate.) If your estate is large enough that gift and estate taxes are a concern, you need to think about those taxes, too.
To learn more about tax-smart gifting, contact Miller Kaplan today. Our certified public accountants can help you determine the best ways to reduce your tax liability and save you money on your 2015 taxes.
We highly recommend you confer with your Miller Kaplan advisor to understand your specific situation and how this impacts you.