Here are some practical family tax planning strategies for families and small-business owners to consider when planning year-end taxes.
Family Tax Planning Strategy #1: Put Your Children on Payroll
Paying your under-18 child reasonable wages for legitimate work can save thousands:
- The wages are deductible for you.
- Neither you nor your child owes payroll taxes.
- The first $15,750 paid to the child is tax-free to the child due to the standard deduction.
- Your child can contribute up to $7,000 to a Roth IRA, building tax-free savings for life.
Be sure to issue a W-2 (not a 1099) and keep clear records of work performed and payment dates.
Family-Focused Tax Move #2: Consider Marriage or Divorce Timing
Your marital status on December 31 determines your filing status for the entire year. Run both scenarios—married and single—to see which is most beneficial. Joint filing usually lowers overall tax, but not always.
For divorces finalized after 2018, alimony is no longer deductible by the payer or taxable to the recipient.
Year-End Tax Strategy #3: Mortgage & Relationship Tax Planning
Two unmarried co-owners can each deduct interest on up to $1 million of mortgage debt for older loans (or $750,000 for newer loans). Married couples are limited to a total of $1 million (or $750,000).
Family Tax Savings Strategy #4: Use the 0 Percent Capital-Gains Bracket
If you assist parents or relatives in lower tax brackets (say, with a joint income of under $96,700), consider giving them appreciated stock instead of cash. They can sell the stock tax-free, preserving more family wealth.
How We Can Help
Sterling Tax and Accounting is here to help your business with tax planning! Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket. If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.
Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.
Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes.
Welcome to the Sterling Standard of business! Want to learn more? Schedule a meeting with our tax planning team here: https://www.sterling.cpa/contact-us/