Wealthy taxpayers with incomes above the threshold can be subjected to new taxes on investment income that takes a substantial bite out of the interest and dividends that they receive. The Affordable Care Act has assessed new taxes on the rich to pay and as a result has made income-shifting strategies more attractive for both single and joint filers. One technique that wealthy clients can use to reduce their taxable income involves gifting some of their assets to their kids, grandchildren, cousins, or other relatives. Taxpayers should learn about the gift tax exclusion and how they can get the maximum benefit from it. Another way for wealthy clients to move money to others indirectly can involve creating a Family Limited Partnership. A person could hire their relatives to perform routine tasks or simply bequeath their assets to family members. The bottom line is that there are many different methods that clients can use to move assets around to reduce or avoid certain taxes. It is a good idea to speak with an experienced estate planner to devise an individual strategy.
See Mark P. Cussen, Income-Shifting Strategies: How They Can Reduce Taxes, Investopedia, November 13, 2015.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
