It Pays to Be Rich for These Five Tax Breaks

It Pays to Be Rich for These Five Tax Breaks

It Pays to Be Rich for These Five Tax Breaks

Although it’s true that the ultra-wealthy are heavily taxed, and in many cases unfairly, there are also some tax break advantages that favor the upper class more than those in the middle. Let’s take a look at some of these breaks.

Most common and first of five tax breaks

* Mortgage Interest – this deduction is available to all; however, because it is tied to the marginal tax rate of each taxpayer it tends to help people with higher income more. The numbers vary, but it has been reported that those with incomes of $250,000 or higher have an average write-off almost $5,500, compared to about $525 for those with incomes between $40,000 and $75,000. The numbers vary by state, but in general, more people with incomes of $100,000 or higher are taking advantage of this break than those who make $75,000 or less. However, there is an OK alternative for those with lower incomes. The Standard Deduction for married filing jointly is $12,200 for 2013 and $12,400 for 2014.

Rich get richer

* Capital Gains – many wealthy people make their income from capital gains, which are only taxed at 20 percent plus 3.8 percent for AGI over 450,000, compared to the 39.6 percent maximum tax rate for regular income.

The wealthy own stocks

* Step-up in Basis – this tax break basically enables the rich to pass off their assets that have increased in value to their beneficiaries while never having to pay taxes on them. Your heirs will only pay tax on the increased value from their value at the time the assets were transferred price to the fair value at the time of sale, should the heir choose to sell the assets.

Estate plan

* Retirement Plans – Available to everyone, retirement plans are even more favorable to the wealthy because they tend to have more money to put away. Therefore, they tend to get more tax benefits than the middle class. There are, however, limitations on the amount that can be contributed ($17,500 for 401(k), 403(b) plans in 2014) and the amount of contributions that can be deducted is phased out for higher incomes (IRA contributions phase out for married filing jointly incomes between $181,000 and $191,000 for 2014).

If wealthy, consider philanthropy

* Charitable Deduction – this is similar to the mortgage deduction. The higher your income and the more you donate, the more valuable the deduction. The deduction is limited to 50% of the taxpayers AGI.

If you aren’t taking full advantage of these favorable tax deductions, then you should contact the professionals at GROCO for help. We can make sure that you’re maximizing your tax return and getting all the benefits to which you are entitled. Contact us today for more details and start saving more of your money.

We hope you found this interview “It Pays to Be Rich for These Five Tax Breaks” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

To receive our free newsletter, contact us here.

Subscribe to our YouTube Channel for more updates.

Alan Olsen, CPA

 

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm with clients all over the world.

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

Posted in ,

Need Help With Your Bookkeeping?

An important part of any business is the company’s bookkeeping efforts. The type of bookkeeping system you use is really up to you as long as you keeps a detailed record of all your expenses and income. In almost all cases, there are no special requirements for keeping your records. On the other hand, every…

IRS Finally Says Sorry for Seizing Small Businesses Bank Accounts

Small businesses face a tough battle in general, but when they have the IRS breathing down their necks it makes it that much more difficult to find success. Things are even more difficult when the IRS decides seize some of these business’s bank accounts. At least now the tax agency is apologizing for its actions.…

Lawmakers Vote To Make Three Tax Provisions for Businesses Permanent

Late last year lawmakers in Washington extended a bill that made three important tax provisions for businesses valid through December 31, 2014. That means those provisions were good for last year’s taxes, but expired when the clock struck midnight on January 1, 2015. The extension was welcome news last year for many businesses. Now there…

It’s Time for a Tax Scam Refresher Course

Despite repeated warnings from the media and the IRS alike, thousands of people are conned out of money every tax season by scammers. Make sure you’re not one of them. Here is a list of some of the most common scams the IRS sees this time of year. The list is not all-inclusive, as scammers…