Highest Tax Bracket, Trying To Push Income To Next year - Tips?

7 Replies

Hi all, 

I have income that comes in from the highest tax bracket possible (over $1mm a year). I do have a strong CPA but was curious if anyone has any tips on things to look into that I might be able to do before the year closes. I expect my tax bracket will be a little better next year and I plan on investing in more real estate for bigger write-offs. This year, I'm behind 8-ball as I focused on my company and building. 

I was thinking about prepaying some expenses that will be inevitable, like insurance, maintenance, etc., but outside of prepaying .... any ideas? Cost segregation isn't an option at this point and there wouldn't be enough time to properly value a deal and buy something. 

I do not need a large vehicle for my business. 

I have a $7,500 writeoff I believe I get for our Tesla recently purchased

I am maximizing my SEP plan.

I have 11 properties, all rentals, but only two are 100% mine and my partner would not to accelerate as he is not in the same financial situation as I am. 

Any advice on something to look into would be greatly appreciated! 

I am in similar situation. I have close to half million in highest tax bracket W2 income
Would really appreciate advice to lower the Tax bill

That is such a good problem to have: 

I am not sure if your CPA has already looked into this but conservation easement can save you a huge amount of money. 

I am sure you are not interested in saving 500 or 1000 with that income, but conservation easement that is done correctly can save you huge huge amount of tax. 

@Bill Adams I’m not in a financial situation to consider what I’m about to suggest but you might be.

Look up captive insurance companies. From my understanding you basically set up an insurance company to provide insurance to yourself. So you own an insurance company and pay premiums to yourself.

Anything that isn’t paid out in premiums you keep. I think you can do this with up to 2 million dollars and all those premiums would be deductible.

They cost a lot of money (500-1M) to set up that’s why only well off people use them. May be something to look Into.

As always talk to a cpa, no tax advice given.

If you end up talking to them about this, I’d be curious to know what they say

@Bill Adams are these TICs or partnerships?

What about the two properties that are 100% yours? I would be happy to discuss with you the possibilities, as per your given situation. It depends very much on when you purchased them, and how much is the depreciable basis.

I am accelerating my itemized deductions as I may lose the state income tax deduction next year based on current proposed tax reform. Likely most people will no longer itemize unless they give tons of money to charity.

In particular, I’m prepaying property taxes on my personal residence. My town allows you to pay 4 equal installments from July 2017 to June 2018, I’m opting to pay all now. Also, while tax publications say you can’t prepay expenses like home mortgage interest, it appears property tax is simply based on date paid. Based on this, I’m going to town hall to try to prepay my 2018-19 property tax as well. Also, I’m paying my Jan 1 mortgage payment in December as the interest on this is accrued from December and therefore it’s not prepaid interest. This all adds up to additional itemized deductions of $30k which at 40% rate is $12k savings.

Check with CPA on this though, I’m cheap and do my own taxes so I could very well be wrong.

You might consider a donor advised fund for charitable giving.  

You can contribute in the current tax year, but the assets are held within the donor advised fund until such time as you are ready to request that a grant be made to a specific charity or cause.

If you contribute appreciated securities you'll get double the 'bang for your buck' as you will not have to pay any capital gains tax, but will get the full value of the charitable deduction.  Example: you own a mutual fund worth 100, your cost basis is 20.  By contributing the appreciated mutual fund you (a) avoid paying capital gains tax on the appreciation of 80, and (b) get to claim a deduction for a charitable contribution of 100.

The donor advised fund is a great way of making a deductible contribution in 2017, but allowing the assets to continue to grow and decide at a later date which causes you want to support.

Ashish, that is perfect. I had heard of that earlier this year and forgot to explore it. My CPA did mention you can get a huge multiplier on the easements

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