If your 2015 tax liability is higher than you’d hoped and you’re ready to gift some assets to your loved ones, now may be the time to get started. Giving away assets will, of course, help reduce the size of your taxable estate.

But with income-tax-smart gifting strategies, it also can reduce your income tax liability — and perhaps your family’s tax liability overall:

1. Gift appreciated or dividend-producing assets to loved ones eligible for the 0% rate.

The 0% rate applies to both long-term gain and qualified dividends that would be taxed at 10% or 15% based on the taxpayer’s ordinary-income rate.

2. Gift appreciated or dividend-producing assets to loved ones in lower tax brackets.

Even if no one in your family is eligible for the 0% rate, transferring assets to loved ones in a lower income tax bracket than you can still save taxes overall for your family. This strategy can be even more powerful if you’d be subject to the 3.8% net investment income tax on dividends from the assets or if you sold the assets.

3. Don’t gift assets that have declined in value.

Instead, sell the assets so you can take the tax loss. Then gift the sale proceeds.

If you’re considering making gifts to someone who’ll be under age 24 on December 31, make sure he or she won’t be subject to the “kiddie tax.” And if your estate is large enough that gift and estate taxes are a concern, you need to think about those taxes, too. To learn more about tax-smart gifting, contact us.

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DISCLAIMER

This blog post is designed to provide information about complex areas of tax law. The information contained in this blog post may change as a result of new tax legislation, Treasury Department regulations, Internal Revenue Service interpretations, or Judicial interpretations of existing tax law. This blog post is not intended to provide legal, accounting, or other professional services, and is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services.

This blog post should not be used as a substitute for professional advice. If legal advice or other expert assistance is required, the services of a competent tax advisor should be sought.