Sy Schnur CPA, Busn. Valuer, Litigation Support Expert Witness & Ins Agent

We Do EVERYTHING MONETARY

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EVERYTHING Monetary

If you own an unincorporated family business, hire your child. The salary is a deductible business expense, and if your child is under age 18, you don't have to pay FICA tax on the amount.

The first $27,950 of taxable income earned by a child is taxed at 15%, regardless of who might be the employer.

This concept is called tax leverage - removing income taxed at a higher rate and causing it to be taxed at a low rate.

USE THE GIFT TAX EXCLUSION

You can give up to $10,000 annually  to any number of individuals without creating a gift tax liability. If the gift is from you and your spouse - regardless of whose funds are used to make  the gift - you can give up to $20,000 to each individual.

You should definitely consider a gift program if your children are 14 or older because their unearned income is not subject to the kiddie tax. Here are some other ideas about how you can make the most of your gifts:

• Give your children property, that is likely to appreciate in value. Both the current value and any future appreciation would be removed from your estate.

• If you plan to sell appreciated property, give it to a child age 14 or older. The gain on the sale will then be taxed at the child's lower rate.

CONSIDER A TRUST TO HOLD GIFTS

If you are reluctant to make irrevocable gifts to your children, you can still take advantage of the gift tax exclusion. A qualified minor's trust provides tax benefits and, at the same time restricts your children's access to the funds.

GRANDCHILDREN'S EDUCATION

If your grandchildren are in college, pay their tuition directly. You remove the amount of the tuition from your estate, and you still have the flexibility to give each of them an additional $10,000 per year without gift tax consequences.

PAYING FOR COLLEGE

Start saving now to ensure that you will be able to pay for your children's
education. The table below 1 how much you need to save each year to
pay for four years of school when a child reaches age 18. It assumes
today's annual cost for public and private colleges is adjusted
respectively. It also assumed that the education costs will increase3.5%
annually and the investment-, would earn 8% net after taxes.

ANNUAL  SAVINGS REQUIRED