Tax Strategies & Savings for High-Income Families
The U.S. income tax system separates taxpayers into different tax brackets based on annual income. Taxpayers who earn less total income are subject to lower tax rates than those with higher incomes. High-earning taxpayers can still save money on taxes, though, by taking advantage of tax deductions and other tax breaks.
Other People Are Reading
-
Home-Related Expenses
-
The cost of state and local real estate taxes is tax-deductible on every property, even expensive homes and second and third homes owned by wealthy taxpayers. As of 2011, the IRS permits taxpayers to deduct interest paid on up to $1 million in mortgage debt on a first and second home. The mortgage interest deduction can amount to tens of thousands of dollars for taxpayers with large mortgages.
Don't Move too Often
-
The IRS states that $250,000 of profit realized from selling a home is excluded from taxation if the seller lived in and owned the home for two of the past five years. A taxpayer who buys a home and sells it before living in it for two years does not meet the minimum usage requirement for the exclusion, so any profit realized from the sale may be subject to capital gains tax. The exclusion is $500,000 for married couples filing joint returns.
-
Gifts
-
When a person dies, his assets become an estate that passes on to beneficiaries like children, grandchildren or other individuals specified in a will. The IRS imposes an estate tax on assets left behind to others, but the tax is only likely to impact wealthy individuals. The first $5 million of assets in an estate are protected from estate tax due to the tax code's Unified Credit. As of 2011, the IRS allows individuals to give away up to $13,000 a year tax-free to any number of recipients--including each child, grandchild and other relations--each year to reduce the size of his estate and estate taxes. Any amount exceeding $13,000 per individual is subject to taxation.
Giving Property to Charity
-
Donations to certain charitable and religious organizations are tax-deductible. Donations of property are deductible to the fair market value of the property given, which is the amount the property would sell for on the open market. Giving away property that has increased in value over time, such as shares of stock, can be especially advantageous from a tax standpoint. The IRS allows the giver to deduct the current market value of property that has increased in value over time if she held the property longer than a year. Giving away appreciated property earns a tax deduction without having to pay the capital gains tax assessed on a property sold for profit.
-
