Saving Through Deferred Taxes

June 25, 2011 by  Filed under: Taxes 

Proper tax planning can save you lots of money. One of the ways of saving with your taxes is delaying the time of tax payment. Delayed payment of taxes can be both advantageous and disadvantageous. Listed below are some of the different scenarios that are advantageous for deferred tax payments:

Delayed Property Sale

Sale of a property attracts a capital gain tax. Therefore, many tax advisers will encourage property owners to avoid selling property that has significantly gained in value, as this will consequently lead to a high capital gain tax. It may be advisable to give it to a charity when you want to dispose of it or alternatively transfer the house to a child or a relative who is in a low income tax bracket.

Donation to a Charity

Donations are tax deductible. Therefore, one way of deferring taxes is to have an accelerated deduction. You can pay a lump sum donation to a gift fund and get a deduction for the payment. For example, if you want to donate $1,500.00 to a charity organization annually, you can give $15,000.00 to a gift fund that will consequently forward the annual portion of the donation to the charity of your choice as per your instructions. The funds are invested and therefore, the charity gets donations with interests gained.

Tax on Commercial Property

Another way that you can defer taxes is by purchasing commercial property such as an office rental building. The IRS allows you to deduct depreciation expenses on the building against rents received to a cap of $2,500.00 a year. Therefore, if you deduct depreciation for 8 years for example, you will have avoided paying taxes on $20,000.00. If you sell the property after the 8 years, you will need to remove the depreciation amount from the purchase price before calculating capital gains for taxation. This means that you delay the payment of taxes for the $20,000.00 portion of your property for 8 years. Furthermore, you get to pay taxes on this portion at a reduced capital gain tax rate as opposed to paying the amount in your income tax rate. This will be an even larger tax savings if you are in a high tax bracket.

Fuel Pipeline Related Partnerships

You can also defer taxes by purchasing a part of a limited partnership in the energy sector. The profits made by companies in the fuel pipeline industry are shielded by charge-off depreciation. You can therefore, avoid paying taxes on the early dividend payout as you will categorize the dividend as a “return on capital.” However, on sale of the partnership shares, you will pay taxes on the portion of the dividends that you had not paid taxes for.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. / Tel:888.321.6188

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