Tax Reduction Strategies
Using the Tax Code to Your Advantage
Congress has enacted laws that have been designed to reduce, and in some instances, even eliminate income and capital gains taxes. Some may consider these “loopholes,” but in most cases these laws were created as incentives to stimulate economic activities that benefit society as a whole. For our tax planning clients, they represent hidden opportunities that can be used as proactive strategies to minimize tax burdens.
Federal law states that you only need to pay your share of taxes and not a penny more. Tax planning capitalizes on knowing how to use the tax code to do just that.
“There is nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn’t prevent that.” - William Rehnquist, Chief Justice of the Supreme Court (1986-2005)
With over 74,000 pages in the Internal Revenue Code, you may not be aware of the many strategies available to help taxpayers, business owners, real estate investors, or entrepreneurs who are looking for legitimate ways to lessen their tax liability. In most cases, tax preparers and CPAs focused on tax filing deadlines may not have the time to research options that will save you money. To properly implement these strategies, you need the help of a team of dedicated tax and financial planning professionals who have scoured the tax code and can help navigate through the details.
Tax Wealth Network is your key resource and guide to unique tax solutions that help to minimize taxes and maximize client wealth.
When selling an appreciated asset – like an investment property, business, medical practice, or a stock – most times an individual is told to “just pay the tax.” But the tax code provides time-tested strategies that may dramatically reduce a client’s tax burden.
Tax Wealth Network helps clients implement strategies by using a team-based approach to implement time-tested options to reduce tax liability while improving overall bottom lines.
Capital Asset Sales
Tax Wealth Network can help you defer, reduce, and even eliminate the taxes triggered by the sale of a highly appreciated asset like small business stock, investment property, a closely-held business, or even a highly-valued primary residence.
- Qualified Small Business Stock: Investors can receive favorable treatment of small business stock in certain types of qualifying
- Charitable Trusts: Using specialized trusts can generate income for a client now while reducing current or future income taxes by using deductions for assets gifted now or in the future to qualified charities.
- Business Trusts: By restructuring the ownership of an asset into a specialized irrevocable trust, capital gains taxes may be deferred to save thousands of dollars in current-year taxes.
- Grantor and Non-Grantor Trusts: These useful estate planning tools offer a range of options that can be used to improve asset protection while lowering estate tax liabilities.
- Family Limited Partnerships: This pass-through tax status arrangement helps family members retain control of assets while also reducing future estate taxes because of valuation and lack of marketability discounts.
- Installment Sales: This financing arrangement allows the buyer to make payments to the seller over an extended period of time, which allows the seller to recognize gain later and not at the time of sale. Specialized variations of this arrangement are available only for certain property types (like agricultural land) that can be “monetized.”
- Structured Sales: In this version of an installment sale, the risk of non-payment of the installment contract by the buyer is offset by structuring a payment flow from a third-party trust using highly secure sources such as an annuity or the use of US Treasuries to guarantee the payments of the contract.
- 1031 Exchanges: This time-tested technique established in the tax code in the 1920s is used by real estate investors seeking to trade out of investment property that has a gain by “exchanging” their interest into one or more other properties following very specific timelines and requirements. Through this method, the gains on the sale are deferred almost indefinitely.
- Fractional Real Estate Ownership (Delaware Statutory Trust aka DST): A specialized version of the 1031 Exchange which allows a real estate investor to exchange an interest into one or more Class A professionally managed properties, relieving the investor from day-to-day operations and risks while collecting income and deferring gains taxes.
- Fractional Real Estate Ownership (Opportunity Zone Funds): Created by the Tax Cuts and Jobs Act of 2018, this strategy allows investors with capital gains from the sale of any asset (not just real estate) to invest in fractional ownership of large-scale commercial, residential, or specialty industrial projects in economically designated zones in the country generating income as well as gain deferral or gain exclusion in certain cases if ownership time limits are met.
- Partnership Interests in Oil & Gas Development Programs: Major tax benefits are available for investors in oil and gas development and extraction. Investments may be used to reduce income from other investments, and, in some cases, the tax liability from high W2 wages or one-time earnings events can be reduced significantly.
Tax Wealth Network can help with all of these as well as other tax and estate planning strategies that may help you.