- Mortgage Interest or
- Gas, Electric, Water
- Cleaning Crews to Dust,
Vacuum and Empty Trash!
- Computers, Copiers,
Fax Machines and Telephones!
- Paper, Pens, Ink Cartridges
and even Postage!
- Desks, Sofas, Coffee
Tables and other Furniture!
- Painting, Wallpaper,
and other Repairs/Remodeling!
- Phones Bills, Cell-Phones,
Pagers and Palm Pilots!
- Newspapers, Magazines,
Books and On-line Media!
- Plane Fares, Hotels,
Meals, Rental Cars while Traveling!
- Dinners, Ball Games,
Theater Tickets & Health Clubs!
- Security Alarms, Hidden
Cameras and Guard Dogs!
- Health, Life, Dental,
Disability and other Insurance!
- Company Cars and even
- Gifts to Charity, Non-Profits,
Libraries and Colleges!
- Contributions to Employee
- Grass Cutting, Landscaping,
Snow Removal, etc...
- Holiday Cards and Postage
sure looks like the two columns of deductions are
Strategies for Business Professionals Top of Page
Here is an outline of what you
will learn in our program:
how to deduct most of your fun such as movies, plays,
and season tickets
how to deduct your golf, golf balls, golf clubs
how to deduct all parties in your home.
how to audit-proof all your entertainment from any
IRS or state audit-guarantee!
how to deduct any vacation anywhere in the world
by combining the trip with business.
the secret as to why IRS doesn’t require receipts
for under $75 per item!
out how to deduct all dry cleaning and laundry and
even the cost of clothing itself! Learn how to audit
proof all travel from even the toughest IRS scrutiny
a little know secret (that is used by the super
rich) to deduct the cost of your children’s weddings
and education including law school and medical school-
out how to get around all those IRA limits so that
you can set up an IRA regardless of income.
the secrets on deducting all your kid's
braces, all dental, all mileage to and
from the doctor, all deductibles, all
eye glasses and contact lenses.
how to deduct two or even the cost of three or more
cars in your business. Find out how to really audit-proof
your automobile deductions.
when and when to avoid leasing a car.
- Learn the
mistake that over 90% of business people make that cost
over $5,000 per year in lost automobile deductions.This
one is a killer!
the biggest secret that most investors miss that
would cut your capital gains taxes in half!! This
one strategy will pay for the entire system alone.
how to legally take a home-office deduction and
yet actually reduce your chances of an audit.
- Find out about
a major bunch of deductions people are missing at home
even if they never claim a home-office deduction.
- Learn the
secrets of what to do if you get audited and eight strategies
on how to actually reduce your chances of being audited.
- Learn about
the pros and cons of incorporating and about the various
types of business entities that are available to you.
- Discover the
real secrets on how to structure any activity as a business
and not like a hobby.
- Learn how
to convert charitable contributions to become business
deductions. And MUCH MUCH MORE!
Castle Into A Tax Deductible Gold Mine! Top of Page
Sandy Botkin CPA. Esq. / Copyright
2001, all rights reserved
Beginning in 1999, Congress liberalized
the home office rules to such an extent that many home based
businesses and especially network marketing businesses can
legally, morally and ethically claim the benefits of the
deduction. In fact, when I analyzed the numbers, the benefit
of claiming this deduction can result in thousands in your
pocket every year. Thus, if you have an accountant that
states that this deduction isn’t worth it, they don’t understand
its immense benefit
Requirements of a Home Office:
To be eligible for the home office deduction for your home-based
business, you must meet several requirements:
your home as your principal office,
your home regularly for business, and
an exclusive portion of your home for business
Principal Office requirement:
Recently, Congress liberalized this in order to allow most
home based businesses and network marketing businesses this
deduction. To constitute a principal office, you must
render significant management or administration for your
business out of your home AND not have another office where
you render significant services. Significant management
or administration means doing the paperwork for the business
in a set spot of your home.
Example: Kara runs a network
marketing business out of her home. She reviews all applications
for her business in her home and inputs all her business
expenses into Quicken in her home. Her home qualifies as
per principal place of business for her networking business.
Caution: If Kara has another
office that is used for her networking business, she may
not be qualified for the home office deduction unless she
does NOT render any significant services from the other
is regular use? You must also work your business regularly
out of your home. Although there is no hard and fast rule
as to what this is, case law generally requires 45 minutes
a day, four to five days a week out of your home. Thus,
if you only work one hour a week, this may not be enough.
constitutes exclusive use? You must use a portion of
your home exclusively for business. This does not mean that
a whole room must be used for business. In fact, you can
use part of a room. However, the part used for business
must be used exclusively for business. Thus, if there are
fiction or cookbooks in the home office bookshelf, get them
out. If you have a computer in your home office, don’t play
games on the computer, etc.
big question that I get at most seminars is, “whether IRS
will visit my home and see if I am playing games on the
home office computer or have non-business books in the home
office bookshelf?” The answer is: Yes, they can. However,
if IRS does choose to visit your home, they will generally
give you between four and twelve weeks advance notice!
Having a home office allows
what type of deductions? The home office deduction applies
to the real estate and not the furniture. Thus, if you qualify
for the deduction, you may deduct part of your utilities,
depreciate part of your home, deduct part of any cleaning
service, part of any home owner’s fees, part of any burglar
alarm monitoring fees etc. No, you may not deduct any part
of your guard dog!
However, even if you don’t qualify
for the deduction, it does not apply to any furniture that
you use for business. Thus, the desk that you use, the chair
, the bookshelf and file cabinet all can be depreciated
to the extent that you use these items for business. They
have nothing to do with the home office deduction. In fact,
you may not be eligible to claim a home office deduction
and still deduct your furniture and equipment to the extent
used for business.
Cautionary Limits: The
home office deduction, unlike any other type of business
deduction, is limited to the net income from your business.
Example: Keith has a net
income from his home based business of $600 per year not
including any deduction attributable to a home office. If
the home office deduction is $5000, he may only deduct $600,
which is limited to his net income from his business.
Tip: Take the home office
deduction anyway even if your net income from your business
doesn’t justify it. You may carryover any excess to future
In short, the home office deduction
can be worth thousands each year in your pocket. It is one
of many reasons why everyone should have a home-based business.
With the right knowledge, you can make tax day- payday!
You Don't Have a Home-Based Business, Start One Today!
Top of Page
Sandy Botkin CPA. Esq.
/ Copyright 2001, all rights reserved
The last decade may have been a decade
of tremendous corporate profits and economic growth, but
for the vast majority of North Americans, the 90's were
a dismal, uphill climb. And many economists believe that
this new millennium won't be getting better any time soon.
Changing business and government attitudes
are the reason. There has seemingly been more anti-business
legislation in the last decade than in any other this
century. Stronger employment and labor laws, the Age Discrimination
in Employment Act, the Comprehensive Omnibus Budget Reconciliation
Act (COBRA, which includes mandating health insurance
for workers for a period of time after they leave employment),
safety laws, much tougher laws for discharging workers,
more liabilities for lawsuits, Family Leave Act, Americans
with Disabilities Act (which is creating immense numbers
of lawsuits), along with higher minimum wages and fringe
Just reading this list is
While these acts have beneficial and
protective aspects, they have also encouraged businesses
to move their facilities. That "sucking sound" popularized
by Ross Perot is not just down to Mexico, but elsewhere
as well. The result has been a dramatic loss of heavy
industry in the U.S.
The young and the middle-aged alike
are realizing that their dream of "having a job with a
company forever" is an illusion. Companies have been downsizing,
rightsizing, and capsizing for some time now, and they
continue to do so - more now than ever before. Even the
federal and state governments are getting into the act
with layoffs and attrition of jobs.
In addition to all this uncertainty
and mutual lack of loyalty between companies and employees,
even the workers who do keep their jobs have no guarantee
of promotions due to the shrinking number of management
positions. These circumstances aggravate the already tryingly
long commutes in rush hour traffic and increasingly typical
frustrated boss-spelled backwards, that double S-O-B.
Finally, if all this isn't bad enough,
under recent tax laws employees are shafted more than
ever with limits and thresholds for their employee deductions
and higher social security tax limits. This results in
more couples working than ever before and, on many occasions,
working more than one job. It is now almost impossible
to have only one job in the family and make ends meet!
Today, many households need three incomes just to survive.
Sadly, even having more than one job
does not produce any major positive effect on most people's
bank accounts. Why? Because of tax laws. This was well
illustrated in 1994 by Jane Bryant Quinn in her Woman's
Day article on "How to Live on One Salary."
Ms. Quinn's example assumed that a man
was earning $40,000 per year. His wife (we will call her
Lori) wasn't working. They had more month than money.
(Sound familiar?) Lori subsequently got an administrative
job for $15,000 per year. You would think this would improve
the family's financial situation, but when Ms. Quinn examined
the economics of getting this extra income, the results
Lori had to pay federal and state taxes
on her new income. Since they filed jointly, the family's
combined income was what established their tax bracket.
She paid $4,500 in new taxes, most of which was non-deductible,
for federal and state income tax.
Lori had social security withheld from
her paycheck at the rate of 7.65 percent, which amounted
to an additional nondeductible amount of $1,148 being
extracted from her salary. She also had to commute to
work 10 miles a day round trip, which is probably conservative
for most people. This resulted (in 1995) in nondeductible
commuting costs of $696.
Lori also had some child care expenses,
which give a partial tax credit. Ms. Quinn figured that
the amount spent over and beyond the tax credit was $4,250
Lori also ate out each day with colleagues,
spending an average of $5 per day, five days a week. This
results in a nondeductible expense of $1,250 per year.
( I would love to know where she ate for only $5!)
Now that Lori has a job, she has to
have professional clothing, this means a hefty dry cleaning
bill. Ms. Quinn assumed that Lori's increased expenses
here amounted to an extra $1,000 per year, nondeductible,
Finally, with both spouses working,
Lori wasn't in the mood to cook dinner every night. They
bought more convenience foods and ate out more frequently.
This resulted in increased food costs of a nondeductible
$1,000 per year in minimum.
Add it all up and Lori's take home pay
was a paltry $1,156 a year, for which she had to put up
with a daily commute, an unpleasant boss, and corporate
No wonder more and more people are starting
home-based businesses. In fact, there are currently an
estimated 30 million people working from their homes.
This number is expected to more than triple, to 97 million,
by the year 2000, and to keep on growing. This has become
and will continue to be one of the greatest mass movements
in the U.S.
Why a Home-Based Business
Makes So Much "Cents"
There are many reasons why so many people
are favoring home-based over traditional business.
There is no commute (unless you have
a really big home), no boss, little if any chance of lawsuits,
much lower overhead, no employees, (or few), and far fewer
government restrictions. In fact, many of the laws previously
cited don't apply to small firms with few or no employees.
It is for these reasons, according to Entrepreneur magazine,
that 95 percent of home-based businesses succeed in their
first year and achieve an average income of $50,250 per
year with many earning much more.
There are really two sets of tax laws
in this country. One is for employees, and it allows deductions
for individual retirement accounts, 401(k)s (if you have
one set up by your company), interest and property taxes
on your home (which some in Congress want to do away with
), and charity. Then there are the laws for home-based
business people who conduct their business either full-time
or part-time. They can deduct, with proper documentation
,their house, their spouse, and even children (by hiring
them), their business vacations, their cars, and their
food with colleagues. They can also set up a pension plan
that makes any government plan seem paltry by comparison.
For Lori - and for you - the meaning
of all this is simple:
Lori earned $15,000 in salary as an
employee, but took home only $1,156. She could have netted
the entire $15,000 had she earned it in a home-based business!
This is an increase of almost 13 times
her take-home pay as an employee.
Notice that Lori is not spending dramatically
more money than she is currently spending. She would eat
out anyway, go on trips and drive her car the same as
before. By having a home-based business, however, many
of their expenses become deductible. This concept is known
as "redirecting expenses." With a legitimate home-based
business, she can now deduct some of the expenses that
she is incurring anyway.
Renegade Strategy: If you
don't have a home-based business, start one!
In addition to all the benefits mentioned
above, Congress will subsidize you while you are growing
your home-based business. If your home-based business
produces a tax loss in the first year or so, you can use
that tax loss against any other income you have. It can
be used against wages earned as an employee, dividends,
pensions, or interest income-or you can use the loss against
your spouse's earnings if you file a joint return.
If the tax loss exceeds all your income
for this year, no problem. You can carry back the loss
two years and get a refund from the IRS for up to the
last two years of income taxes paid, or you can carry
over the loss twenty years. You read it right: You can
offset up to 20 years of income!
Mike earns $50,000 in a job with the government.
If he starts a home-based business that generates a tax
loss of 10,000, he only pays tax on $40,000.
Renegade Tip: You can never lose a properly documented business
deduction as long as you run your legitimate business like
a business and not like a hobby..
In fact, if everyone in the U.S., who is employed full-time
began a home-base business, used the strategies I suggest,
each household could easily save between $2000 and $10,000
in taxes each year. If all employees in the U.S. did this,
the tax bite of the IRS would be reduced by a whopping estimated
300 billion dollars annually. Of course, Congress would
have to change the laws for this to occur.
Renegade Strategy: Get LUCK
- Labor Under Correct Knowledge.
Can You Succeed In a Home-Based
Research has constantly shown that it
is rarely the business that determines success or failure.
It is usually the business owner. Why does one person
succeed and another fail at the same business?
Two words - Knowledge and
Some people want the benefits of having
their own business, but they don't take action. The result
is business failure.
Then there are the people who are always
working. They take action but still fail. The reason is
that they are not taking the correct actions, the knowledgeable
actions, that will bring the desired results. Again, business
It's like drilling for oil. If you set
up a drilling rig in your back yard, it is going to fail
at producing oil unless your back yard is in Texas or
Alaska. The same rig in a good field will produce a gusher,
because it was placed where oil was known to exist.
The point is that most people who get
excited about starting their own home-based business do
so without all the necessary knowledge. Consequently,
many people quit before they acquire, through experience,
the knowledge they need, without realizing that they are
getting substantial tax breaks. This leads to another
Renegade Strategy: Learn
to duplicate the success of others.
Duplicating the strategy of others is
much quicker and more effective than going to the school
of hard knocks.
It is also known as modeling, which
is well illustrated by the way The McDonalds Corporation
blazed a trail to success that many have since followed.
In the early 1950's McDonald's and other
start-up companies discovered that they could grow many
times faster than the conventional firms through franchising.
Instead of the company investing millions of dollars to
build new stores, they let independent franchises do it
It seemed like a great idea, but at
first no one figured out how to make it succeed on a consistent
basis; therefore, the media attacked relentlessly and
continually. News articles featured destitute families
who had lost their life savings through franchising schemes.
Virtually every state attorney general in the U.S. condemned
the new marketing method. Some congressmen even tried
to outlaw franchising entirely.
Over the years, however, Ray Kroc and
his management team at McDonald's developed a turnkey
franchise business team at McDonald's franchise. The newfound
success-from the system-turned public perception of franchising
around. Today, virtually every franchise business models-to
some extent-the franchise business system created by McDonald's,
making franchising one of the most respected ways of doing
business in the world.
Modeling is simply learning what other
successful people have done to achieve success in a specific
area, and then doing the same thing. Someone said that
"education is the shortcut to experience." With modeling,
you literally leverage your own learning with the collective
years of learning through experience of many others. Modeling
the success of others saves both time and money and reduces
frustration and stress.
The light at the end of the tunnel,
for you and millions of others today, is the financial
opportunity that starting your own business offers. If
you have one going already, then make sure you are enjoying
the many financial advantages to which your smart choice
entitles you. The tax advantage alone can make a home-based
business the single best financial move you could ever
Up A Business Top of Page
CPA. Esq. / Copyright 2001, all rights reserved
Many times people have
asked me, “What forms are needed in order to start up a
business. Here is a checklist of most of the required information.
I should note that this list may not be complete since each
state has its own requirements which may or may not differ
from what is presented here:
1.Certificate Of Occupancy:
If you are planning on occupying a building, you may have
to apply to get this from your local city or county zoning
department, especially if the building is new or you will
conduct substantial improvements to the premises.
2. Business License: Many states require licensing
of a host of businesses. Sometimes the license need be gotten
from the state, and sometimes it need be gotten from the
city or county. I should note that many home based businesses
and networking businesses do not ordinarily need a license.
3. Starting Out With
The Right Organization: There are lots of ways to start
out a business: Corporation, S Corporation, LLC, Sole Proprietorship
etc. The choice of entity determines the amount of liability
protection, amount of paperwork hassle and some tax planning.
For example, California taxes corporations both in state
and out-of-state corporations with a minimum tax of $800.
Thus, many factors go into this decision, and it should
be investigated thoroughly. I discuss some of the factors
on pages 131-139 of my accompanying workbook to my Tax Strategies
4, Fictitious Business
Name: If you use a name for your business or sole-proprietorship
other than that of your own name, you must generally register
the fictitious name with the county
5. Trade Name and Trade
Mark protection: If you want to protect your trade name
and any special trade marks that you want developed to brand
your business, you will have to file a “Registration of
Trademark of Service Mark” with the U.S. Department of Commerce.
For further information call
Also call the Commissioner
of Trademark and Patents, whose number is listed below.
6. Copyrights and Patents:
If you have developed some special invention or have some
written material that you don’t want people to copy, you
need to file for a patent for an invention or copyright
for written materials. To register a patent or copyright,
it must be done with the Commissioner of Trademarks and
Patent and Copyright Applications. The phone number for
patent registration forms and questions is: 800-786-9199.
The phone number for copyright forms is: 202-707-9100. If
you have a copyright question, call: 202-707-3000.
7. Business Insurance:
All businesses have some form of business insurance to cover
them for theft of business equipment and for liability problems.
Most homeowner policies exempt business equipment from their
coverage. Check with your property and casualty agent.
8. Sales Tax Number:
In many states, you may be required to collect and remit
sales tax. Thus, you should get a sales tax number in the
states that you would be conducting business, especially
your home state. I should note that many networking companies
take care of this for you with the state. They usually have
a deal with each state. If you are joining a multi-level
marketing company, check with them about this.
9. Unemployment Insurance:
If you have any employees or if you incorporate (you will
be the employee), you will have to pay both federal and
state unemployment insurance. Contact your state unemployment
insurance office for the forms and instructions. Also, you
will have to get an employer ID number from the IRS by filing
form SS-4 with the IRS. This will set you up for withholding
for any employees and for federal unemployment tax.
Tip: Use a payroll
service. Payroll services will file all forms such as W-2s,
forms 940 and 941 for unemployment and social security etc.
It is inexpensive to use them and saves you a lot of hassle.
A good payroll service can charge you about $40 per month
for all this or you can subscribe to our Tax Tool Box which
will give you a payroll service plus unlimited toll free
consulting plus audit protection for less than the payroll
service alone. It is only $579. Call 800-829-0874.
10. Immigration Act:
If you have employees, you will have to verify employment
eligibility of these employees, or you can be hit with a
sizable penalty. You will have to file form I-9 for each
new employee, other than for yourself or your immediate
family if they are US citizens. For additional information,
11.Health and Safety:
Be aware that there are lots of health and safety laws applicable
to employees. The Federal Occupational Safety and Health
Administration have some standards and brochures that you
should read. Call them for information. Usually, it simply
means posting some rules on the wall. This is especially
true if you open a restaurant or have a manufacturing facility.
12. Workers’ Compensation:
If your business employees three or more people,
this Workers’ Compensation Insurance must be carried to
cover injured employees. The owner may usually exempt himself
or herself from this if they wish.
13. Minimum Wage:
Be aware that there are minimum wage rules in this country
that must be honored.
14. Form W-4 For Each
Employee: Each employee must fill out IRS form W-4 for
withholding and for claiming exemptions. If these change,
it must be filed out for each year of the change. See IRS
publication 505. Generally, for every $2,800 in new deductions
that you expect such as, housing interest, expected losses
from a business, or for each dependent, you may claim an
short or maybe not so short: this article should give you
a great summary of your legal requirements and some legal
issues of starting a business. It should, at the very least,
keep you out of trouble and limit some penalties for non-compliance.
Take A Bite
Out of Your Taxes Before Year’s End! Top of Page
Botkin CPA. Esq. / Copyright 2001, all rights reserved
You are coming to
the end of the year. You hopefully made your estimated tax
payment in September and now are wondering “What can I do
for this year to both reduce this year’s taxes and next
years taxes?” This article will give you some relief for
the "tax time blues."
1.Max out your contributions
to IRAs and other pension plans: You could put money
into an IRA(if you are not covered by a qualified plan)
if you are married filing jointly and make less than $150,000
of Adjusted Gross Income. Single people must make less
than $95,000. I recommend that you set up a Simplified
Employee Pension (SEP) that allows you to put away 20%
of your net income up to $40,000 for you and the same
for your spouse. You can make the contribution before
you file your tax return next year but the plan MUST be
in existence before December 31.
2. Offset capital gains
with capital losses: If you have a stock loss or other
capital losses, you can use these losses against any other
income but the offset is limited to $3,000 per year. However,
they can be used to offset all capital gains. Thus, if
you have any capital gains, sells items that produce a
capital loss to offset the gains.
3. Direct your broker
to sell the latest stock purchased: Interestingly,
when you sell stock, IRS assumes that you sold the earliest
stock purchased. Thus, if you bought some shares for $30
a share, then for $40 per share then for $50 per share,
IRS assumes that you sold the shares that cost $30 first.
This gives the maximum amount of gain. Always direct your
stockbroker to sell the latest shares first. You will
receive the same amount of money but end up paying the
least amount of tax.
4. Don’t forget the
new child tax credit: . In 2002, you get a $600
tax credit for each dependent under age 17. This is better
then a deduction since it is a dollar for dollar reduction
in your taxes. The catch is that if you are single, it
starts phasing out when your adjusted gross income (AGI)
exceeds $75,000 and for married people, the phase out
starts at $110,000.
5. Take advantage of
the other new tax credits: You can get an extra $1,500
Hope Scholarship credit for yourself, dependents or spouse
to offset any college or graduate school tuition. What
Congress gives they take away. This credit phases out
at $40,000 if you’re single or at $80,000 if you are married
You may also be eligible
to receive a lifetime learning credit of $1,000 for educational
expenses. The same phase-out applies as with Hope Scholarship
Credits. Some of these credits can be used as alternatives
to each other. See your accountant about this.
6. Deduct all prior
points paid to get loans when refinancing Due to declining
interest rates, you may have refinanced your home or rental
property. If you paid any points on the original loan
that was not deducted, you may deduct all unamortized
points upon refinancing. This is an often-overlooked big
deduction that requires to your look back several years
at your settlement sheets.
7. If you don’t deduct
it, give it away: When you sell stock or art, you
will pay tax on these items. Instead, give away-appreciated
property to charity and get a deduction for the full fair
market value. The key is to give away property that was
used personally such as used clothing, electronics or
to give away investment property held for over 12 months.
If the investment property is held less then 12 months,
your deduction is your cost, yuck! Also under recent tax
law, if you give $250 away in cash to a charity in any
one-month period, you need to get a supporting statement
from the charity that you gave this gift. Don’t forget
to ask your local church or synagogue to give you this
statement at year-end. A gift of $5,000 or more or property
requires an appraisal by a certified appraiser.. Check
with your accountant regarding large gifts to charity.
Finally, bunching your charitable deductions may be the
way to go if you don’t ordinarily itemize your deductions.
Pay for all dues or tithes this year for two years. You
might want to charge the charitable gift on your credit
card and get the deduction this year even though you don’t
make the credit card payment until next year. I should
note that, however, if you have inventory that you want
to deduct (such as inventory gotten through mandatory
monthly purchases), you can donate some of this inventory
and get a charitable deduction for your cost. Get an itemized
statement of what was donated.
8. Maximize the benefits
of holiday gifts: First, all business gifts are deductible
to prospects. The good news is that year-end gifts, birthday
gifts etc. can qualify as a business gift. Congress isn’t
that generous. There is a limit of $25 per person per
year, and a husband-wife is considered to be one person
for tax reasons. Gifts, however, to organization for the
use of all their employees do not have a $25 limit. Thus,
if you give a gift of candy to the head of the local IBM
plant or union office with directions that this is to
be for all their employees (that is not to be used by
only one person), the gift becomes fully deductible.
9. Maximize your tax-free
allowances: Good estate planning allows you to give
away up to $11,000 per person per year with no gift tax.
If you are married and your spouse is feeling very charitable,
you can give away up to $22,000 per person per year gift
10. Don’t forget social
security numbers for your new children: If you want
to add your new "bundle of joy" to your list of exemptions,
you will need to get a social security number. You cannot
claim them as an exemption without a social security number
listed on your tax return.
11. Use the gift leaseback
technique to shift a bundle of income: You can sell
some stock or real estate at a gain and have it taxed
to your tax bracket or, if you are luckier and have held
onto the property for at least one year, you can get a
maximum capital gain rate of 20%. How would you like to
cut your taxes on all stock sales and sales of real estate
and collectibles by as much as 50%?! No kidding! The technique
is both simple and very little used. Give the stock or
real estate or collectibles to your children or grandchildren.
One day later, they will sell the gifted property and
have the gain taxed at their tax bracket. If you have
relatives in the 15% bracket, this could save you a bundle!
Moreover, if they are at least 14 years of age by December
31 and are in the 15% tax bracket, any long-term gain
is taxed to them at a special 10% long-term capital gains
rate, not at your normal long-term rate of 20%. This can
result in a potential savings of a whopping 50% of the
tax!! There is one pitfall that you should be aware of.
This technique should only be used with children or grandchildren
who are at least 14 years of age. Otherwise, the gain
(over $1,500} is taxed to you at your normal tax bracket.
If you consider that the stock market has appreciated
by at least several trillion dollars, the benefits of
everyone using this technique can be enormous.
The bottom line
is that the holidays can be very expensive with all the
party costs and gifts. However, with a little bit of proper
tax planning, you can make both your holidays and your
life a lot less taxing!
Sandy Botkin is a CPA, attorney
and former trainer of IRS attorneys nationwide. He lectures
all over the nation on tax planning for self-employed and
corporate taxpayers and can be seen in the big events with
Donald Trump, Anthony Robbins and many others. He has been
written up in Newsweek and in many other magazines. He is
also a syndicated writer and noted author of this famed
tape series “Tax Strategies for Business Professionals”
and “Tax and Financial Strategies for Residential Real Estate.”
His Kit is Included in SOHO Suite #3. Top of Page