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What Is Important To Know About Tax Planning?

KEY TAKEAWAYS

  • Tax planning can reduce your income and capital gains taxes so you can keep and reinvest as much as possible for use during your lifetime
  • Tax planning strategies range from the basic tools you can access via TurboTax β€” the mortgage interest deduction, the childcare credit β€” to dedicated legal structures like IRAs and Charitable Remainder Trusts

Unfortunately most Americans end up paying more of their hard earned gains in taxes than they have to. A big question for taxpayers who are looking to reduce their taxes is what is their goal. Here we are going to dive deeper into how you can maximize the assets you have for you and your spouses use (tax planning)

What Is Tax Planning?

Tax planning is work done to allow you to pay the lowest taxes possible on your assets and income and applies to everyone who pays taxes. Tax planning is work done in order to legally maximize your tax breaks and minimize the taxes you pay.

Understanding Tax Planning

Tax rules can be complicated but the impact can be massive. In a progressive tax system like the United States where the highest income , tax planning is the reason why the richest 400 Americans are able to pay a lower tax rate than the bottom 50% of Americans.

Common forms of tax planning for Americans are charitable deductions, pre-tax investment accounts and charitable trusts (Phil Knight has given ~$890m of Nike stock to charitable trusts for the tax advantages).

At Valur we offer tax planning solutions for :

  • Deferring the taxes on unrealized investment gains:
  • CRUTs: Defer taxes on unrealized capital gains up to the length of your life (estimate your savings here)
  • Opportunity Zones: Defer taxes on unrealized capital gains until 2026 and avoid capital gains taxes on appreciation in real estate investments in government specified areas
  • Reducing the taxes on already realized income such as salary or capital gains
  • Grantor Charitable Lead Annuity Trusts (CLAT) – estimate your savings here

Other commonly used solutions include:

  • Exchange funds: Which are a common way for executives to diversify their holdings of a publicly traded stock without β€˜selling’ shares. However, exchange funds typically carry annual costs between 1% – 1.5% of the assets you put in.
  • Donor Advised Funds (DAF): These are a common way for people to charitably give appreciated assets and receive a tax break. However, unlike a CLAT you won’t receive any money back from the fund while receiving an equal tax break.
  • Conservation Easements: Congress allows an income tax deduction for owners of significant property who give up certain rights of ownership to preserve their land or buildings for future generations. This does require a significant amount of overhead.
  • There are many other solutions ranging from the common and simple such as tax deductions to the less common and more complex oil and gas investments that carry write-offs that we won’t cover here.

Conclusion

As your goals and financial situation change, so does the right solution. Our goal at Valur is to democratize knowledge about these solutions and to make the planning process seamless, so that everyone can take advantage of the best wealth-building solutions for them.

Next Steps

About Valur

We built a platform to give everyone access to the tax and wealth building tools of the ultra-rich like Mark Zuckerberg and Phil Knight. We make it simple and seamless for our customers to take advantage of these hard to access tax advantaged structures so you can build your wealth more efficiently at less than half the cost of competitors. From picking the best strategy to taking care of all the setup and ongoing overhead, we make it easy and have helped create more than $500m in wealth for our customers. Schedule a time to chat with our team and learn more about how we can help you!