Can a Trust Help You Save on State Income Taxes?

senior couple with financial advisor

Of course, when it comes to lowering taxes almost all taxpayers first and foremost focus on taxes at the federal level. There are of course many ways to save on federal income taxes and the majority of taxes we all pay go to the federal government. So it makes sense that most taxpayers put the lion’s share of their tax-saving efforts towards their federal tax bill. However, depending on which state you live in you could save a nice chunk on your state income tax as well.

There is a certain tax-saving strategy that has been growing in popularity the past few years among the wealthy. They are using trusts to help reduce their exposure to state income tax rates. Incomplete gift non-grantor trusts (ING trusts) can help transfer the tax exposure of those who live in high-tax states like California to a state with no income tax like Texas, Florida or Nevada.

Many of the nation’s wealthy families and individuals who have been using this ING trust strategy, which has grown in popularity over the last 10 years, are reaping the rewards. That’s because ING trusts can help the wealthy lower the state income tax at the trust level. This is especially true if they are nearing a substantial gain.

However, it’s important for anyone setting up an ING trust to do it before there is any intent, or letter or sales discussion that would lead to a given gain. You don’t want it to look like you are setting up the trust simply to avoid taxes. For more information on ING trusts contact GROCO.

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Foreign Real Estate Buyers in Vancouver Facing New Tax


It’s no secret that many wealthy individuals own multiple homes, including vacation homes in foreign countries. In an effort to capitalize on this popular trend amongst the wealthy, many countries and/or cities have created new taxes aimed specifically at wealthy real estate buyers from foreign countries. Among the latest locations to enact a new tax on wealth property buyers is Vancouver, BC in Canada.

According to recent reports, the housing market has seen a huge shopping spree lately in the area as many wealthy foreign buyers, especially from China, have been snatching up homes at a fast pace. In fact, foreign buyers spent more than a billion dollars on homes and property in British Columbia between June 10 and July 14 of this year alone. With the increasing demand for property in BC, housing prices have soared almost 30 percent in the last year, which has left many local buyers unable to compete for these homes.

Therefore, in an effort to keep things fair, the British Columbian government has issued a new 15 percent tax, which will apply, to all “foreign nationals or foreign-controlled corporations” purchasing property in the metropolitan Vancouver area. BC is not the first place to issue such a tax. Australia and Singapore both recently raised the tax on foreign real estate buyers as well. The BC government said that anyone who attempts to avoid the new tax could face fines in the six figures and up to two years behind bars.

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Do You Still Have Outstanding Business Tax Returns?


Entrepreneurs have a lot on their plate, as do all business owners. However, whether you’re just starting out or you’ve been in business for years, you need to makes sure that you stay up to date on your taxes. Missing taxes returns or filing them late can bring huge headaches, and in some cases big fines and/or even prison time. If you don’t file a return you stand to be penalized 5 percent every month for the unpaid amount with a maximum of 25 percent.

Some business owners who take a loss figure they don’t need to bother filing a return because they don’t owe any tax. That’s also a mistake. Did you know that you could actually use your losses for future years, or even past years, when you make a profit? That can help reduce your tax bill. You might also be missing out on big tax credits during those down years. So file a return even if you don’t owe any taxes.

On the other hand, some business owners know they will owe money to the IRS but think that the agency will never get around to tracking them down. Don’t make that mistake either. It might take a while, but the IRS will most likely eventually come calling. If you have already made the mistake of not filing for a year or more, then be proactive and start filing late returns now. The term better late than never is very true when it comes to tax returns.

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IRS Will Get its Share From Olympic Medalists, Too

rio olympics

If you’re like most people in the country, and many others around the world, then you’ve been watching the Summer Olympics over the last 10 days or so. After all, they only happen once every four years. There have been many exciting storylines, like Michael Phelps’s unmatched dominance in the pool, Usain Bolt’s continued ownership of the World’s Fastest Man title and Simone Bile’s unprecedented Gold Medal run in women’s gymnastics.

Each time an athlete takes his or her place on the medal podium they are all smiles. Of course, they should be very happy. Winning an Olympic medal is a great accomplishment. However, with winning comes a tax bill. That’s right. American athletes are taxed for their winnings, and even for the value of the medals, themselves.

The U.S. Olympic Committee pays its winning athletes $25,000 for each gold medal, $15,000 for a silver and $10,000 for a bronze. So what does that mean for someone like Michael Phelps? Well, he earned five more gold medals and one silver medal in Rio, which means he earned $140,000 in bonuses. However, he will pay about $55,000 of that in taxes to the IRS.

That’s not all; the winning athletes also pay taxes on their actual medals. The reason they owe this money is because their cash bonuses as well as their medals are considered income, just like any other type of prize winnings.

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Apple Not Ready to Bring Foreign Income Back to U.S. Anytime Soon


Despite all the wonderful products and groundbreaking technologies Apple has been responsible for over the years, the tech giant is certainly no stranger to criticism. That criticism comes in many forms, including from competitors and those who prefer competitors’ products. There are also some that criticize Apple for some of the company’s business practice, including the practice of sheltering money overseas.

Many of the country’s largest companies use this practice to save on taxes. The money they earn on foreign soil stays on foreign soil because the consequences of bringing it to the states would be a very hefty tax bill. However this practice makes good business sense, considering that the U.S. corporate tax rate currently sits at 35 percent, which is one of the highest rates in the world.

While this is a perfectly legal practice, some critics claim that what Apple and other businesses are doing is unpatriotic. However, Apple’s CEO Tim Cook says it has nothing to do with being patriotic. “It is the current tax law. It’s not a matter of being patriotic or not patriotic,” Cook said in a recent interview. “It doesn’t go that the more you pay, the more patriotic you are.”

Cook said Apple would be happy to bring money earned on foreign soil back to the U.S., but not until lawmakers come up with a fair rate, which he hopes they will do sooner rather than later.

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Mark Cuban’s Take on Donald Trump’s Taxes

mark cuban

If you follow the presidential election then you know that this year’s run for the Oval Office is perhaps one of the most spite-filled elections our country has ever faced. According to many political pundits, talking heads in the media and dozens of poll results, the last two candidates standing – Donald Trump and Hillary Clinton – are the two least-likable presidential candidates of all time. Whether you agree with that sentiment or not, the perception among many is that this election will finish with one of the country’s most unpopular presidents of all time in the White House. There are many complaints about both candidates but throughout the entire election process one of the continuing outcries has been for Mr. Trump to release his tax returns.

Should He or Shouldn’t He?

So far, Mr. Trump has not given in to those demands. His opponent has released her tax returns and has joined in the call for Mr. Trump to do the same. Many claim that Mr. Trump’s refusal to make his returns public is just more evidence that he has something to hide, which many say is another strike against him. However, not everyone thinks his refusal to turn over his tax returns to the public is a sign of something terrible. In fact, another billionaire that has come out and stated that he will be supporting Mrs. Clinton in November says Mr. Trump’s refusal to share his tax returns isn’t a big deal at all. Mark Cuban, Venture Capitalist and host of Shark Tank doesn’t really think Mr. Trump has anything to hide.

Do Tax Returns Really Matter in the Election?

The owner of the NBA’s Dallas Mavericks, Magnolia Pictures, and Landmark Theatres and the chairman of the HDTV cable network AXS TV, Mr. Cuban recently said in an interview that the fact that Mr. Trump won’t make his returns public is irrelevant. “I know for my taxes, when it’s tax time there’s a big living room table that I have and there’s big stacks of paper all over the table. I just look at the signature pages and it takes me 45 minutes still just to sign all that stuff.” In fact, before this year (because he actually looked this time), Mr. Cuban said in any previous year he couldn’t have told anyone how much he made or what was on his taxes. “It certainly was not a reflection of net worth or of how much anyone gives to charity or anything. Any one given year may be up or down, so I don’t care if they release their taxes.”

Perhaps It’s Brand Protection

When asked why he thinks Mr. Trump is not releasing his taxes, Mr. Cuban said he really had no idea, but his best guess is that it might have been a down year for Mr. Trump so he doesn’t really want to share that information. “He may have taken a negative income last year and that certainly doesn’t match up to his brand. So it doesn’t matter.”

To read more on Trump’s Tax returns click here.

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Is Obama Secretly Trying to Raise the Death Tax Again?

carrying casket

Democrats and Republicans have been battling over the estate, or death tax for decades. Democrats always push for a higher rate, while republicans would like to completely eliminate it. During the most recent Bush administration the death tax dropped from 55 percent to 45 percent and the threshold increased significantly. Families with assets of $675,000 or more were subject to the tax before president Bush took office. After Bush entered the White House, the estate tax was changed to affect only those families with assets of $10 million or more.

Valuation Discounts Under Fire

That was a big win for republicans but that doesn’t mean the current president is ready to give up on the issue. According to reports, the treasury department recently introduced new regulations aimed at limiting the ability of families to use valuation discounts in order to lower their estate tax liability when someone in their family passes away. A value discount is a great way to save because it enables families to reduce the taxable value of a given asset that doesn’t possess an extensive and commonly traded market. For example, if a person who owns a business worth $30 million wants to pass it on to his children when he or she dies the death tax would be applied to only $20 million after the $10 million exemption.

Holding Wealth Would Be Tougher, Taxes Higher

However, if a family cannot easily sell the business, or some of its assets, because a market does not exist for just a piece of the family-owned company, then its value is decreased. That’s why valuation discounts are so helpful, because they make it possible for a family to reduce the value of its business and thus better show its lack of marketability. So how would the Treasury’s new proposals affect the estate tax? In order to take full advantage of valuation discounts many family-owned businesses create limited liability companies (LLCs) or family limited partnerships (FLPs) so they can hold onto, and eventually transfer, their wealth for estate planning purposes. If the new regulations were to become law it would mean family-owned businesses would have a more difficult time using valuation discounts, which would most likely raise the death tax bill on families that try to hold onto and transfer their companies and their business’s wealth. This could also very likely wipe out jobs and slow the economy because these types of businesses would be broken up.

Still Time to Raise Your Voice

Despite the fact that Congress has continued to shoot down efforts to raise the estate tax and lower the threshold, President Obama is seeking to go around the House with this latest effort. However, there is still time for people to express their opinions on the matter. These regulations will not take affect until they are published as final regulations. In fact, the proposed regulations are subject to a 90-day public comment period, according to the U.S. Treasury Department, which means taxpayers have until December 1 of this year to express their thoughts and opinions.


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Three Ideas to Start Reducing This Year’s Taxes Now


Everyone wants to save on their taxes but many people don’t start thinking about tax savings until the next tax deadline rolls around. The real key to saving on taxes is to focus on those savings year round.

One of the best ways to legally save on your taxes, especially for the wealthy, is to harvest your losses. Of course, you face taxes on any capital gains made by selling investments. However, if you also have some capital losses from stocks that haven’t performed as well you can offset some, or perhaps all, of those gains. You can even use your losses to offset up to $3,000 in regular income if your losses are higher than your gains. You can also save some of your losses for the next tax year.

Another popular way to cut your tax bill is by setting up a flexible spending account through your employer. This account allows you to set aside pretax income for healthcare or dependent care expenses. You can then use that money throughout the year for bills you had already planned on paying and that money is tax-free.

Lastly, if you’re in the market for a home, or perhaps a second or third one, you should be aware of the tax benefits available to you. In addition to the deduction for the mortgage interest payment you can also get a tax break for your property taxes.

These are just a small sample of the ways you can start saving on your tax bill right now. Contact GROCO at 1-877-CPA-2006 or click here for many other tax-saving tips.

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How To Save on Taxes in Retirement

retired couple biking

If it’s time to retire and you haven’t started already to plan for taxes then you need to get started now. Even if retirement is still a ways off, you should always be thinking ahead. In any case, one of the most common question people have regarding retirement is how do I lower my tax bill? There are several things you can do that will help you keep your tax bill down after you retire.

One of your best bets is to open a Roth IRA. While these retirement accounts are created with after tax money, they also grow tax-free. Yes, you will have less expendable income when you deposit after-tax money into a Roth, but you won’t have to pay taxes on the gains you make when it comes time to withdraw the money. Another option is to simply convert some of your traditional IRA savings into a Roth IRA.

With all retirement accounts, at some point you will have to start taking money out, which is your required minimal distribution. However, if you don’t really need that money you can save on taxes by simply donating it to a good cause. In fact, you can donate up to $100,000 every year from a traditional IRA to charity.

You should also pay close attention to where you invest your money and make sure that you are putting it into the right kind of account. Having your income in the right place can help reduce your tax bill.

Lastly, although not an option for every taxpayer, you could move to a state with a lower tax rate. Florida, Texas and Nevada are some of the best options for those looking for a lower overall tax bill in retirement. However, there are many expenses to consider in retirement other than just your tax bill, so make this decision wisely, based on all the relevant factors.

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Some U.S. Businesses Not Happy With Obama’s Plan to Stop Inversions


In recent years tax inversions have become increasingly popular as several large U.S. companies look to lower their corporate tax bills. This process consists of a company shifting its headquarters from the United States to a foreign country, which helps it greatly reduce its taxes. While this practice is completely legal many lawmakers, including President Obama, have called for measures to stop it, or at least make it a lot less attractive.

In fact, the president recently announced more proposals to prevent the practice. However, many banks and companies are crying foul over the latest proposals, claiming that they would be complex and expensive. Democrats in Congress are all for the proposed changes, as they want to prevent U.S. companies from skipping out on their tax bills. However, republicans claim the rules would discourage foreign investment in the U.S. and that the Obama administration is overstepping its authority.

Meanwhile, according to several trade groups and businesses that represent the many different sectors involved, including retailers, bankers and manufacturers, as well as oil producers, have argued that the Treasury’s proposal to put a stop to deductions by reclassifying the debt as equity would only serve to disrupt their operations and weigh down their businesses with more regulations and unnecessary red tape.

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