- Forward thinking tax planning
- Understand how your financial products work
- Learn how to coordinate your products
- Measure performance
- Compare financial decisions
- Eliminate financial errors and omissions
Tax planning is the analysis of a financial situation or plan to ensure that all elements work together to allow you to pay the lowest taxes possible. Considerations of tax planning include the timing of income, size, purchases, and planning for expenditures. Tax Network USA offers tax planning services to help our clients lower their taxes for years to come.
Tax planning is the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency. Through tax planning, all elements of the financial plan work together in the most tax-efficient manner possible.
It is often assumed that spouses can split income earned in a joint account equally or in whatever way minimizes their overall tax bill. This is not the case. In general, each spouse must report their share of income earned in a joint account in accordance with the proportion of funds they have each contributed to the account.
Tax avoidance is structuring your affairs so that you pay the least amount of tax due. Tax evasion is lying on your income tax form or any other form.
The federal gift and estate tax is essentially a tax on the transfer of wealth. Every estate is potentially subject to the federal gift and estate tax; however, every taxpayer is also entitled to an exemption. Federal gift and estate taxes are levied on the combined total of the value of all gifts made during a taxpayer’s lifetime and the value of all assets owned by the taxpayer at the time of death. Although the federal gift and estate tax rate fluctuated historically, the American Taxpayer Relief Act of 2012 (ATRA) permanently set the rate at 40 percent.
Portability refers to a surviving spouse’s ability to use any unused portion of a deceased spouse’s lifetime exemption. For examples, imagine that Ronald and Cindy are married. Ronald passes away in 2019 leaving behind an estate valued at $9 million. Ronald’s estate would use $9 million of his $11.4 million lifetime exemption. The remaining $2.4 million would “port” over to Cindy. Cindy would then have a $13.4 million exemption (Cindy’s $11.4 million plus Ronald’s $2.4 million = $13.4 million) that can be used when Cindy’s estate is probated. Keep in mind that these figures only work while the increased lifetime exemption amount is in place.
The annual exclusion is an extremely beneficial tax avoidance tool that allows each taxpayer to gift up to $15,000 in assets to an unlimited number of beneficiaries each year tax-free. Couples can gift-split and gift assets valued at up to $30,000. By way of illustration, a married couple with four children could transfer $120,000 in assets each year without using any of their lifetime exemption.
