Last-Minute Tax Tips for High Net Worth Taxpayers
If you’re one of those taxpayers that like to wait till April to file his or her taxes, then there are still some new things you should know about before you file. That’s especially true if you’re a high net worth individual or an investor. By now, you probably know that the personal exemption no longer exists. You’ve probably heard the standard deductions have gone up and the SALT deduction has been capped at $10,000. Tax experts and pundits have already discussed these changes in great detail.
There are some other changes that you might not have heard as much as about. But if you’re a high earner, then you should pay attention to these tax tips. Have you wondered how the tax changes will affect the so-called kiddie tax? What about the estate tax and gift taxes? Have they changed too? There are some new rules for converting your traditional IRA into a ROTH IRA, as well. And you thought things were supposed to get easier with the Tax Cut and Jobs Act (TCJA).
The Estate Tax
The estate tax has never been a big worry for the majority of taxpayers. Only a very small percentage of taxpayers have had to even consider it. And the new tax law has pushed it even further away from the masses. In fact, only the ultra wealthy have to worry about it now. That’s because couples can have an estate worth up to $22,360,000 before they have to worry about paying any kind of estate tax.
That figure is double what it used to be before the TCJA. The threshold for single filers is half of the amount for couples. But beware, the old limits will return in 2026. And let’s be honest, if certain lawmakers have their way, and they get control in Washington, then the estate tax could be back sooner than that.
Additionally, when it comes to the estate tax, and estate planning in general, it’s always a good idea to get competent, professional help. The last thing you want to do is lose everything, or close to it, before you get to leave your inheritance to your family.
Progressive Kiddie Tax
And what about the “kiddie” tax? According to the IRS, this law, “taxes certain unearned income of a child at the parent’s marginal rate, no matter whether the child can be claimed as a dependent on the parent’s return.” Changes to this law make trust tax brackets more compressed, which means some kids will end up paying top tax rates a lot sooner than their parents.
Converting your traditional IRA to a ROTH can be a great move for almost anyone. However, now more than ever, you have to get the timing right. It used to be that you had till October 15 of the following tax year to undo a ROTH conversion if the tax situation wasn’t ideal after conversion. But that loophole is gone. Now, once you convert you can’t go back.
If you’re a high net worth individual, then make sure you utilize every tax tip available when filing your taxes. You can trust GROCO to get you every penny you deserve.
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