What Can You Do to Reduce Your Tax Liability? – Part two

 Effective and frequent tax planning can help taxpayers save hundreds and sometimes thousands of dollars per year. This is why we encourage our clients to contact us during the off season to plan for their current and future tax return.
Strategies to reduce your tax liability
In part one, we discussed how you may be able to reduce your tax liability by deferring your income to the following year. We will discuss two other strategies here in part two: moving some of your income to other family members and planning your deductions.
Moving Income to Other Family Members
Shifting some of your income to family members who make less income may reduce your family’s tax liability. Currently, you can make a tax-free gift of up to $14,000 per year to each recipient without being accountable for federal gift taxes. For example, you may be able to gift some of the income from the sale of a property to other family members.
If you are careful and correctly follow the tax code, you may be able to move income to a family member by hiring your son or daughter for your business. To take advantage of this strategy, however, you need your business to establish a limited partnership. It is also imperative to keep in mind when implementing such a strategy that unearned income over $2,100 is taxed at the marginal tax rate of the parents if the child is under 18, or is a full-time student 23 or younger and earns less than half of his or her financial support. Because taking the proper steps is so essential, I suggest prior to initiating such a move you discuss this strategy with your tax professional.
Planning Your Deductions and Postponing Income
If you own a business and itemize your deductions, and will earn more in 2015 than 2016, you may benefit from increasing your deductions before the end of the year. For example, you might want to purchase that new delivery van prior to the first of the year. In fact, you could consider paying your January and February 2016 office rent this year rather than after the New Year. You could also benefit by making larger charitable deductions prior to the conclusion of 2015 and reducing them in 2016.
Whether you are considering accelerating your deductions or postponing income to the coming year, as discussed in part one of this article, it is best to consult with your tax accountant and have that professional analyze your situation. Certainly, you are welcome to contact our office for assistance.
Professional Tax & Financial Services is located at 25124 Springfield Ct., Ste. 260, in Valencia. For more information, please call 661-259-1967 or 1-800-998-4829. You may also visit our tax services website at www.scvprotax.com.