A total of 147,444,789 individuals filed federal income tax returns this year. That is in addition to the 2.2 million corporation income tax returns that were filed for tax year 2014. Both numbers will probably go up next year year.
It can be assumed those filers, or their financial advisors, will take into consideration most of the deductions available to them. But how many knew some of the more obscure tax maneuvers that can save the filer money?
Robert S. Keebler, a partner with Keebler & Associates LLP, a tax advisory and CPA firm in Green Bay, Wis., works with financial advisors to maximize their clients’ tax strategies. He presents a workshop on the many ways to reduce tax obligations. For Financial Advisor magazine he has come up with what he considers 10 of the more obscure tax tips that may go overlooked by advisors.
Following are some tips that Keebler says advisors can take advantage of for their clients.
No. 10: Avoid margin status for stocks with qualified dividends because the dividends will be taxed as ordinary income.
No. 9: Consider that most protective puts cause qualified dividends to be treated as ordinary dividends.
No. 8: Put select clients into defined-benefit pension plans when possible.
No. 7: Use oil and gas partnerships for high-income sophisticated clients.
No. 6: Use real estate investments to add cash flow with a “depreciation tax shield.”
No. 5: Consider Internal Revenue Code §42, §47, or §48 partnerships for clients with sufficient income tax from passive activities to utilize the credits.
No. 4: Use charitable remainder trusts to reduce taxation from a substantial sale, provide for retirement income, or to shift income to other family members.
No. 3: Consider that the tax on children’s unearned income does not necessarily include the net investment income tax.
No. 2: Use the intentionally defective non-grantor trusts to avoid state income taxes.
No. 1: Consider, with the client’s other advisors, trust and estate distributions to shift income into the lower tax brackets.