2020 Last-Minute Year-End Tax Strategies for Marriage, Kids, and Family
If you are thinking of getting married or divorced, you need to consider December 31, 2020, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children, who are subject to the kiddie tax)? If so, you need to consider the zero-taxes planning strategy.
And now, consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way?
Here are six strategies to consider as we come to the end of 2020.
If you bought your house after December 15, 2017, then the reduced $750,000 mortgage limit from the TCJA applies. In that case, for two single people, the maximum deduction for mortgage interest is based on a ceiling of $1.5 million.
You have to run the numbers in your tax return both ways to know the tax benefits and detriments for your particular case. But a quick trip to the courthouse may save you thousands.
If the answer is yes, is your loved one in the 0 percent capital gains tax bracket? The 0 percent capital gains tax bracket applies to a single person with less than $40,000 in taxable income and to a married couple with less than $80,000 in taxable income.
If the parent or other loved one is in the 0 percent capital gains tax bracket, you can get extra bang for your buck by giving this person appreciated stock rather than cash.
Example. You give your aunt shares of stock with a fair market value of $20,000, for which you paid $2,000. Your aunt sells the stock and pays zero capital gains taxes. She now has $20,000 in after-tax cash to spend, which should take care of things for a while.
Had you sold the stock, you would have paid taxes of $4,284 in your tax bracket (23.8 percent times the $18,000 gain).
Of course, $5,000 of the $20,000 you gifted goes against your $11.4 million estate tax exemption if you are single. But if you’re married and you made the gift together, you each have a $15,000 gift-tax exclusion, for a total of $30,000, and you have no gift-tax concerns other than the requirement to file a gift-tax return that shows you split the gift.
If you have any question(s) above, feel free to contact us at 503-747-6534. Or email us at [email protected]. Please note: We strongly suggest reaching our to your CPA in regards to any question(s) in regards to tax related matters.