Tax planning is an important part of financial planning, and with the current tax laws, there are a number of ways to reduce your tax liability. We will show you how to do so, the right way, in this article.
Getting Started With Tax Planning
Before getting started with trying to reduce your tax liability through asset protection planning, it is imperative to do the following:
1. Review Your Assets and Liabilities
Completing a personal balance sheet can be a helpful way to get a snapshot of your current financial situation. It can help you identify your assets – things you own that have value – as well as your liabilities, or the money you owe. By taking stock of your net worth – the difference between your assets and liabilities – you can get a sense of how financially healthy you are and where you may need to make changes.
2. Determine What Type of Asset Protection Is Best for You
There are a variety of different types of asset protection available to individuals, and the best type of protection for you will depend on your specific situation. Some common forms of asset protection include trusts, limited liability companies (LLCs), and offshore accounts. Each has its own advantages and disadvantages, so it is important to do your research and consult with a Raleigh tax planning attorney at Wilson Ratledge before making a decision.
3. Implement a Plan To Protect Your Assets
The next step to reducing tax liability while protecting your assets is to put the established plan into action. This can involve setting up trusts, creating a will, and/or creating an LLC. Working with an experienced estate planning lawyer can help you create a plan that fits your specific needs and protects your loved ones in case something happens to you.
Some Legal Ways To Reduce Tax Liability Through Asset Protection Planning
1. Use Charitable Contributions
Qualified charitable contributions are a great way to reduce your taxable income and save money on your taxes. The North Carolina deductible qualified charitable contribution is up to 60% of your adjusted gross income. There are a few things to keep in mind when making a donation, such as the type of charity and the value of the donation.
To be eligible for a tax deduction, donations must be made to qualified charities. Qualified charities are organizations that have been approved by the IRS as being eligible to receive tax-deductible contributions. Some common examples include churches, schools, and other nonprofit organizations.
The value of your donation is also important to consider. Generally, you can deduct the fair market value of any donated goods or services. However, there are some exceptions.
Giving gifts is a popular way to celebrate holidays and special occasions, but it can also be used to reduce tax liability. The key to reducing your tax liability when gifting is understanding the gift tax exclusion.
The Federal gift tax exclusion allows you to give up to $16,000 per person per year without having to pay taxes on the gift. If you exceed the $16,000 limit, you may have to pay taxes on the amount that exceeds the limit. However, there are ways to give larger gifts without having to pay taxes.
You can gift assets such as stocks or property and avoid paying taxes on the gift. Additionally, you can spread out large gifts over multiple years in order to avoid having to pay taxes on the larger gifts too.
3. The Use of Trusts
Trusts are a valuable estate planning tool that can be used to reduce or eliminate your tax liability. Trusts can be used to hold assets and income for beneficiaries, which can help reduce the amount of taxes you pay on those assets. Additionally, trusts can be used to transfer property and income to beneficiaries in a way that minimizes the taxes they pay.
Trusts can also help protect your assets from creditors and lawsuits. An often chosen way to reduce tax liability, if you too are looking for a way to reduce your tax liability, trusts may be the solution for you.
Consult With an Experienced Asset Protection Attorney
In conclusion, there are many ways to reduce your tax liability through asset protection planning. These range from gifting to LLCs, to wills to trusts to offshore accounts, and many more. By following the advice in this article, you can take steps to reduce your tax liability and protect your assets.
Consult with a North Carolina tax planning attorney at Wilson Ratledge to get started on asset protection planning today. We will work with you to create a plan that will best suit your needs and protect your assets.