2017 vs. 2018 Federal Income Tax Brackets

Single Taxpayers
2018 Tax Rates – Standard Deduction $12,000 2017 Tax Rates – Standard Deduction $6,350
10% 0 to $9,525 10% 0 to $9,325
12% $9,525 to $38,700 15% $9,325 to $37,950
22% $38,700 to $82,500 25% $37,950 to $91,900
24% $82,500 to $157,500 28% $91,900 to $191,650
32% $157,500 to $200,000 33% $191,650 to $416,700
35% $200,000 to $500,000 35% $416,700 to $418,400
37% Over $500,000 39.60% Over $418,400


Married Filing Jointly & Surviving Spouses
2018 Tax Rates – Standard Deduction $24,000 2017 Tax Rates – Standard Deduction $12,700
10% 0 to $19,050 10% 0 to $18,650
12% $19,050 to $77,400 15% $18,650 to $75,900
22% $77,400 to $165,000 25% $75,900 to $153,100
24% $165,000 to $315,000 28% $153,100 to $233,350
32% $315,000 to $400,000 33% $233,350 to $416,700
35% $400,000 to $600,000 35% $416,700 to $470,700
37% Over $600,000 39.60% Over $470,700


Married Filing Separately
2018 Tax Rates – Standard Deduction $12,000 2017 Tax Rates – Standard Deduction $6,350
10% 0 to $9,525 10% 0 to $9,325
12% $9,525 to $38,700 15% $9,325 to $37,950
22% $38,700 to $82,500 25% $37,950 to $76,550
24% $82,500 to $157,500 28% $76,550 to $116,675
32% $157,500 to $200,000 33% $116,675 to $208,350
35% $200,000 to $500,000 35% $208,350 to $235,350
37% Over $500,000 39.60% Over $235,350


Head of Household
2018 Tax Rates – Standard Deduction $18,000 2017 Tax Rates  – Standard Deduction $9,350
10% 0 to $13,600 10% 0 to $13,350
12% $13,600 to $51,800 15% $13,350 to $50,800
22% $51,800 to $82,500 25% $50,800 to $131,200
24% $82,500 to $157,500 28% $131,200 to $212,500
32% $157,500 to $200,000 33% $212,500 to $416,700
35% $200,000 to $500,000 35% $416,700 to $444,500
37% Over $500,000 39.60% Over $444,500


Estates & Trusts
2018 Tax Rates 2017 Tax Rates
10% 0 to $2,550 15% 0 to $2,550
24% $2,550 to $9,150 25% $2,550 to $6,000
35% $9,150 to $12,500 28% $6,000 to $9,150
37% Over $12,500 33% $9,150 to $12,500
N/A N/A 39.60% Over $12,500


FICA (Social Security & Medicare)
FICA Tax 2018 2017
Social Security Tax Rate: Employers 6.2% 6.2%
Social Security Tax Rate: Employees 6.2% 6.2%
Social Security Tax Rate: Self-Employed 15.3% 15.3%
Maximum Taxable Earnings $128,400 $127,200
Medicare Base Salary Unlimited Unlimited
Medicare Tax Rate 1.5% 1.5%
Additional Medicare Tax for income above $200,000 (single filers) or $250,000 (joint filers) 0.9% 0.9%
Medicare tax on net investment income ($200,000 single filers, $250,000 joint filers) 3.8% 3.8%


Education Credits & Deductions
Credit / Deduction 2018 2017
American Opportunity Credit (Hope) 2500 2500
Lifetime Learning Credit 2000 2000
Student Loan Interest Deduction 2500 2500
Coverdell Education Savings Contribution 2000 2000


Miscellaneous Provisions
2018 2017
N/A – No longer exists N/A Personal Exemption $4,050
Business expensing limit: Cap on equipment purchases $2,500,000 Business expensing limit: Cap on equipment purchases $2,030,000
Business expensing limit: New and Used Equipment and Software $1,000,000 Business expensing limit: New and Used Equipment and Software $510,000
Prior-year safe harbor for estimated taxes of higher-income 110% of your 2018 tax liability Prior-year safe harbor for estimated taxes of higher-income 110% of your 2017 tax liability
Standard mileage rate for business driving 54.5 cents Standard mileage rate for business driving 53.5 cents
Standard mileage rate for medical/moving driving 18 cents Standard mileage rate for medical/moving driving 17 cents
Standard mileage rate for charitable driving 14 cents Standard mileage rate for charitable driving 14 cents
Child Tax Credit $2,000 Child Tax Credit $1,000
Unearned income maximum for children under 19 before kiddie tax applies $1,050 Unearned income maximum for children under 19 before kiddie tax applies $1,050
Maximum capital gains tax rate for taxpayers with income up to $51,700 for single filers, $77,200 for married filing jointly 0% Maximum capital gains tax rate for taxpayers in the 10% or 15% bracket 0%
Maximum capital gains tax rate for taxpayers with income above $51,700 for single filers, $77,200 for married filing jointly 15% Maximum capital gains tax rate for taxpayers above the 15% bracket but below the 39.6% bracket 15%
Maximum capital gains tax rate for taxpayers with income above $425,800 for single filers, $479,000 for married filing jointly 20% Maximum capital gains tax rate for taxpayers in the 39.6% bracket 20%
Capital gains tax rate for unrecaptured Sec. 1250 gains 25% Capital gains tax rate for unrecaptured Sec. 1250 gains 25%
Capital gains tax rate on collectibles 28% Capital gains tax rate on collectibles 28%
Maximum contribution for Traditional/Roth IRA $5,500 if under age 50 $6,500 if 50 or older Maximum contribution for Traditional/Roth IRA $5,500 if under age 50 $6,500 if 50 or older
Maximum employee contribution to SIMPLE IRA $12,500 if under age 50 $15,500 if 50 or older Maximum employee contribution to SIMPLE IRA $12,500 if under age 50 $15,500 if 50 or older
Maximum Contribution to SEP IRA 25% of eligible compensation up to $55,000 Maximum Contribution to SEP IRA 25% of eligible compensation up to $54,000
401(k) maximum employee contribution limit $18,500 if under age 50 $24,500 if 50 or older 401(k) maximum employee contribution limit $18,000 if under age 50 $24,000 if 50 or older
Estate tax exemption $11,200,000 Estate tax exemption $5,490,000
Annual Exclusion for Gifts $15,000 Annual Exclusion for Gifts $14,000

The Clock is Ticking

Some investment commentators have been predicting that the bull market is about to plunge and turn bearish ever since this long-running bull market launched back in March 2009. At some juncture, the naysayers will be right. Perhaps what’s most significant is the way stock prices have remained so steady throughout 2017. Despite a few short bursts of anxiety-fueled market declines – events like the surprise Brexit vote – the market has stayed in the tightest range we’ve seen since 1965. Traders note that the average daily trading range for 2017 has been 0.55 percent – the lowest on record.

This environment of extreme calm is not only very unusual, it also suggests that the return to a more normal pattern of daily swings is statistically well overdue and could happen in the near future. Recent political and economic news have triggered analysis and predictions on what we might expect in the coming weeks. The following are a few key talking points around the industry.

  • Executives at major corporations are distancing themselves and their corporations from the president. The post-Charlottesville furor that arose after President Trump failed to explicitly condemn white supremacist organizations for their violent acts, ended up with many chief executives stepping down from the president’s business advisory councils. Other corporate leaders at major manufacturing companies and financial institutions have spoken publicly about their support for inclusivity, diversity and tolerance. It remains to be seen if this resurgence of the role of businesses in the national political and social debate will have any impact on Wall Street or will end the so-called “Trump bump” effect on the stock market.
  • Some market strategists don’t think major change is coming regardless of what happens in Washington. They tend to downplay Trump’s ability to ruffle Wall Street. Others trying to measure investor sentiment think there is a shift, and that investors are becoming increasingly nervous.
  • Geo-political turmoil and tragedy overseas in Barcelona and Finland, as well as political protest at home, have reminded us of sad realities. Various financial news outlets have undertaken their own research to measure sentiments and track investor fear. Some report escalating levels of investor concern, and others reference the VIX index – Wall Street’s so-called gauge of fear – which has remained very low despite a few recent hiccups.
  • The stock market remains linked to the U.S. economy even if factors like the Federal Reserve’s very low interest rates have been significant in the bull run’s longevity. The expansion of the economy continues – steady if unspectacular – helping to make this the second-longest rally investors have ever seen. Will it continue? At this juncture, statistically we are overdue for a correction, and every day added to the bull run makes it more likely that its days are numbered.

The commentary above is intended to be general observations only. Bear in mind, that not even the smartest, most experienced brokers on Wall Street can tell you when the tide will turn. If you think it might be time to retune your portfolio strategy, make sure to get expert advice from your tax and investment advisors before you act. 

Tax Strategies for Selling Business

Tax and Financial News

Tax Strategies For Selling Business Salt Lake City – A Family Affair?

Selling Business Salt Lake CityWhen it comes to selling your business Salt Lake City, finding an optimal tax strategy depends on the purchaser. Transferring a business inside a family requires very different tactics and treatment compared to a sale to an independent third party. There is no one-size-fits-all strategy; the best tax treatment is always determined by the unique circumstances of the situation Selling Business Salt Lake City.

The best tax strategy for an interfamily transfer largely depends on whether the owner has sufficient outside resources or if they are counting on the sale to fund their retirement or next venture.

In cases where the owner has sufficient resources, one option is to directly gift shares or interests in the business to family members. Gifting can trigger gift tax consequence but not income tax consequences, and the recipient assumes your cost basis in the transferred asset. Let’s look at a few scenarios to see how this could work out.

In the first example, assume that at the time of the owner’s retirement, the value of the company is $10 million. If you gift the company to family members at that time (assuming gift-splitting from a married couple), the $10 million value is assessed against your lifetime gift/estate tax unified credit), the current total unified credit in this situation is slightly less than $11 million. As a result, gifting in this scenario would not result in any tax owed and leave you with just under $1 million of unified credits to apply to other assets.

In a second scenario, assume the owner holds on to the company until death and then transfers it via their estate to family members. Also assume that the company has grown since it was worth $10 million and that at the owner’s death is now worth $40 million. In this scenario, there is now a substantial estate tax issue. So we can see that generally, if the value of a business is expected to increase substantially over time, it pays to transfer to subsequent generations sooner rather than later.

Next, let’s look at options under the opposite situation – where the owner needs to take out proceeds from the sale or transfer of the company to live on.

The first option here is that the owner could retain actual ownership and only transition management to the following generation. This allows the owner to keep an income stream from the business. The problem here is that eventually the family will end up in the same situation as discussed above, where waiting and passing the entity through the owner’s estate will result in substantial estate tax liabilities. So the question remains then, if the owner is dependent on the company for income, what can be done to avoid estate taxes upon transfer?

The second option is that the owner sells the company to the next generation. In this case assume the children do not have the cash to buy the business outright, so the owner issues a note to enable the purchase at the time that the business was worth $10 million. Here, issuing the promissory note would essentially freeze the transfer value at $10 million. The purchasing children would then pay deductible interest on the promissory note to the parents out of income from the acquired company. At the time of the issuer’s death, the children’s own promissory note would pass to back to themselves. The issue here is that upon the sale of the company, the parent would realize a capital gain and incur an income tax liability. Overall, it is likely (but not certain, dependent on the exact situation) that the capital gains tax on an early sale is likely to be far less than the estate tax incurred on a transfer at death after significant appreciation.

As you can see, there are many variables and options at play in transferring a company to the next generation, so it is best to plan ahead with the help of qualified professionals.

Get a Free Consultation

Areas of Services: Selling Business Salt Lake City, Selling Your Business, CPA Firm Sandy UT, CPA Sandy UT, Accountant Sandy UT, Taxes Sandy UT

New Trade Pact Could Impact Your Business

Tax and Financial News

New Trade Pact Could Impact Your Business

CPA Whitecity UT

More than five years of contentious negotiations have come to an end, and the Trans-Pacific Partnership is now complete. The TPP is the largest trade deal in more than two decades. It joins 12 countries, including the United States, in easing tariffs, creating agreed-upon minimal standards for both worker and environmental protections, and establishing intellectual property protections. Proponents believe the agreement will help increase American-made exports, thereby growing the U.S. economy, providing well-paying jobs, and strengthening the middle class.

The TPP is no small development. It involves more than 40 percent of the world’s competing economies, making it a big deal for business owners of all sizes. The TPP is not law yet in the United States because it must still be approved by Congress. During the summer of 2015, Congress granted President Obama fast-track authority to negotiate the deal. This means the President and his administration were given complete authority to craft the agreement, which must be given a straight up or down vote by Congress without the possibility of amendments or filibusters. Many groups are opposed to the TPP, including an unlikely alliance of labor unions, certain Democratic factions and Tea Party Republicans.

U.S. businesses are likely to experience significant changes if the TPP passes Congress and becomes law. The TPP removes tariffs on thousands of different goods manufactured in the United States. As a result, manufacturers who export their products directly to TPP member countries should experience increased economic activity. The U.S. Chamber of Commerce expects the TPP to spur a $125 billion increase in U.S. exports over the next decade. On the other hand, the TPP applies both ways, so U.S. manufacturers can expect increased competition as well. Tariffs will fall on TPP member goods coming into the United States on everything from electronics to textiles. Tariffs in the following areas represent the most significant changes.

  • Manufactured products: Tariffs are eliminated on every manufactured product that the U.S. exports to TPP countries. For example, U.S. manufactured machinery currently has import taxes as high as 59 percent added to it by importing TPP countries.
  • Agriculture products: Import taxes on American agricultural products to TPP countries are reduced. Import taxes currently as high as 40 percent on poultry products, 35 percent on soybeans and 40 percent on fruit will be lowered.
  • Automotive products: Tariffs that are currently as high as 70 percent on U.S. automotive products are eliminated.
  • Information and communication technology: The TPP eliminates import taxes as high as 35 percent on American-made IT exports to TPP countries.

Further, the TPP gives greater authority among Pacific Rim Nations to the United States instead of granting that role to China. China however has its own trade agreement in the making, known as the Regional Comprehensive Economic Partnership. The TPP primarily favors the United States because China is widely perceived to have lower labor and environmental standards. The trade deal could also give the United States more leverage in negotiations regarding China’s currency manipulation. Currently, China enables the value of TPP partners’ currencies to remain artificially low, thereby making it more difficult for U.S. companies to sell their goods in the Asia-Pacific region.

There are many other specifics in the TPP that can affect businesses; however, just these few tariff-related items are significant in their own right. Keep an eye out in 2016 to see if the TPP becomes law and these changes actually become a reality.

Areas of Services: CPA Whitecity UT, Accountant Whitecity UT, Business Valuation Whitecity UT, Wealth Management Whitecity UT

Estate Planning Sandy UT

Estate Planning Sandy UT

Same-Sex Marriage Can Be Taxing

Estate Planning Sandy UTIn the case Windsor vs. U.S., the Supreme Court struck down the main provision in the Defense of Marriage Act (DOMA) that defined marriage for federal purposes as between a man and women. Generally, the Windsor case was not viewed as a tax case; however, there are profound and far-reaching tax consequences of this ruling. Estate Planning Sandy UT. The Supreme Court’s decision now requires the federal government to treat same-sex couples the same as married heterosexual couples if they are legally married in one of the states that permits same-sex marriage. Many questions still remain unanswered, such as how to resolve conflicts between state laws and to what extent these changes will be applied retroactively. There are a number of clear and present issues that impact tax law right now.

There are three main tax effects that result from this ruling. First, there is the right to file a joint tax return. Filing a joint tax return might result in a lower total tax liability for the couple. Typically, this is advantageous when one spouse is a higher wage earner than the other; however, it can actually create higher taxes if both spouses earn similar amounts and are highly paid. Depending on an analysis of the situation, it could be advisable to file amended tax returns or protective refund claims. Favorable situations could be where the couple would have lower taxes as result of filing jointly or where one spouse had capital gains that would have been cancelled out by the capital losses of the other spouse. The general statute of limitations for refunds is the latter of three years from the date of filing or two years from payment.

While the Windsor case itself applied retroactively in granting an estate tax refund, it is currently uncertain how the IRS will apply the decision to individual tax returns; retroactively to all cases where the statute of limitations has not run, only prospectively or only where protective refund claims have been filed.

Second, employers need to make the necessary administrative tax changes and adapt for the new benefits that married same-sex couples now qualify for. Employees’ withholdings might need to be updated to reflect their new filing status. Health coverage provided to same-sex spouses could now be tax-free. Additionally, pension and other retirement plans might also require tax-related administrative changes.

Third, ESTATE PLANNING Sandy UT is subject to major changes as a result of this ruling. Married couples receive favorable treatment on many estate and gift tax provisions. Same-sex couples should update their plans to take advantage of these changes:

  • The ability for the estate of the first spouse to die to transfer any unused exclusion amount to the surviving spouse.
  • The opportunity to receive a marital deduction for amounts transferred to the surviving spouse.
  • The ability to make split gifts.
  • The opportunity for either spouse to use the marital deduction to transfer unlimited assets to the other spouse during their life gift-tax free.

While these three issues reflect the major changes of the DOMA ruling, many other more minor tax changes result as well such as the deductibility of alimony.

There are two major caveats to the Windsor ruling. First, there are currently no decisive regulations or laws for same-sex couples who were legally joined together under marriage-equivalents such as domestic partnerships or civil unions. In cases where these situations apply, it might be worth filing protective refund claims in hopes that this issue is resolved in favor of marriage-equivalent relationships. Second, it is unclear how the changes in the law will apply where a same-sex couple work and live in states where one recognizes their marriage and the other does not.

If you think these changes could a have significant impact on your tax situation, give us a call to discuss how we can help analyze your personal situation.

Read More

Free Consultation

Areas of Service:  Estate Planning Sandy UT, Wealth Management Sandy UT, Wills Sandy UT.

Business Valuation Sandy UT

Business Valuation Sandy UT

Selling Your Business to Pay for Retirement

Business Valuation Sandy UTMany small business owners get so immersed in day-to-day operations that they don’t take the time to consider long-range plans, such as retirement. But even for those who are able to work a good, long time – avoiding the misfortunes of health issues, financial emergencies and business setbacks – retirement tends to sneak up on you. Business Valuation Sandy UT 

However, the day will come when you realize that you can’t work forever, and at some point the business you’ve labored to build will need to work for you. Don’t let that moment come so late that you haven’t prepared your enterprise to procure the highest price possible.

You might think you have retirement covered. Once you’re ready, you’ll just sell the business and retire on the proceeds. But that plan can have flaws. For example, what if when you want to retire, the economy is in a downturn and there are few prospective buyers?

What if you have to sell before you previously intended due to a health concern or family emergency? If we have learned anything during the past decade, it’s to plan for contingencies.

Do you have a plan to aggressively pay off your mortgage and other obligations so you can retire debt free? Do you have insurance to protect both your business and family should something happen to you? It’s important to start strategizing ahead of time so that, regardless of whether all goes to plan or not, you have options when the time comes to retire. A big part of this equation is to understand the value of your business as it relates to retirement planning.

Because a small business is often built on blood, sweat, experience and long hours, it can be difficult to step away and view it as an asset. To create a retirement plan, it’s important that you recognize this and consider how much that asset is worth. To get started, hire a third party appraiser or broker to value your business from an objective market perspective. Bear in mind that there are three methods typically used to assess the value of a business:

  1. Asset approach – Add up all of the assets and subtract their depreciation to determine value.
  2. Income approach – Calculate the net present value of the income generated by your business by discounting future cash flows and applying multipliers to EBIDA (Earnings Before Interest, Depreciation and Amortization).
  3. Market approach – Compare your business to others in your industry, paying careful attention to similar size and location, and factor in intangible variables such cash flow, market opportunity, economic conditions, customer loyalty, team experience, etc.

You might wish to value your business using all three approaches and then establish a price based on the one with the most favorable valuation. Recognize, too, that the value of a small business is frequently influenced by less tangible assets – such as the expertise of a key employee – so it’s not always effective to use a simple mathematic formula.

It’s also a good idea to plan two exit strategies. For example, Plan A might be to sell for a generous profit, while Plan B is to retain equity in the business but hand it over to someone else to run if you don’t get an offer for the price you want. Consider your future market and the ideal buyer, and manage your business so that it will be an attractive turnkey for that target when you’re ready to sell. Or, think about grooming a younger employee or one of your children to take over the business when you retire. Perhaps selling isn’t your best option – if you remain invested in the business it could generate passive income to supplement your nest egg.

There’s your business plan, and your retirement plan … now is the time to think about how to integrate the two.

Free Consultation

Areas of Service: Business Valuation Sandy UT,  Valuation Expert Sandy UT

Estate Planning Salt Lake City

Estate Planning Salt Lake City

The Importance of Reviewing/Updating a Will and Account Beneficiary Designations

Estate Planning Salt Lake CityIn his mid-twenties, Gary married a waitress named Tiffany. Estate Planning Salt Lake City The marriage lasted only a couple of years, and then Gary went on to marry Jill, had two children – Caroline and Sarah – and became a partner at his architectural firm. At age 50, Gary passed away suddenly from heart failure while running a half marathon. Sarah was a junior in college and Caroline had moved back home after graduation while looking for a “real” job.

While Jill had a lot on her plate as a new widow, she wasn’t worried financially because she and Gary had updated their wills just a year before. But what she learned next was devastating. Although Gary named Jill sole beneficiary in his will, he had never changed the beneficiary designation for his work 401(k) plan or life insurance policy since he’d started at his firm 25 years earlier. That meant that his ex-wife Tiffany, now thrice divorced and living in a trailer park, would receive the majority of the family’s assets.

This sounds like a one-in-a-million situation, but the fact is it represents one of the biggest mistakes people make in estate planning. It happens because people’s lives tend to grow richer and more complex as they get older. They switch jobs, buy homes, divorce and remarry, have children and stepchildren, adopt at a late age, and are completely swept away by a life filled with neighborhood barbecues, weekend youth soccer games and trying to make ends meet. Administrative chores like changing beneficiary designations on old accounts is one of those little details that is often overlooked.

A financial advisor might not ask about assets he does not manage, such as life insurance policies or a company 401(k) plan. As such, there might not be anyone reminding you to update account beneficiary designations for your employer retirement plan, IRA, annuity, insurance policy or even bank accounts.

Be aware that a will does not supersede the beneficiary instructions of these separate accounts; therefore, it’s important to review and update your beneficiary designations every so often for each of your accounts – and always whenever one of the following scenarios occur:

  • Marriage
  • Divorce
  • Remarriage
  • Job change
  • Retirement plan rollover
  • Birth of a child or grandchild
  • Adoption of a child or grandchild
  • Beneficiary dies or becomes disabled
  • One of the your financial institutions changes ownership

One common scenario is that of two separate families joining via a second marriage. If stepparents and stepchildren aren’t confusing enough, imagine the new couple decides to have a baby together who is much younger. The younger sibling may be resented by and not likely to have a strong relationship the older siblings, and yet, she could end up at their financial mercy if she is left out of the will and/or beneficiary designations.

The moral of this story is that writing a will is important to appoint a guardian for your under-age children, an executor for your estate and to communicate your desires. However, a will is not the last word on asset transfers, so it’s just as important to keep your account beneficiary designations up-to-date and consistent with your will.

Free Consultation

Areas of Services: Estate Planning Salt Lake City, Estate Planning Sandy UT, Estate Planning South Jordan

Business Sale Salt Lake City

Business Sale Salt Lake City

Getting Value from Your CPA

Business Sale Salt Lake CityHow did you fare on April 15? Business Sale Salt Lake City Did you file on time or extend? How was your tax bill? Did you owe money or receive a refund? We won’t talk about whether you paid too much tax because no matter the amount, all Americans feel they pay too much tax. So how did April 15 treat you? Regardless of your answer, if you didn’t consult your CPA during the year, you may have missed out on his or her real value.

You see, most people think the value of a CPA comes only in that short period of time between January 1 and April 15, but the true value comes throughout the year when you consult your CPA on financial matters. The matters can be simple, such as how much to withhold for federal and state taxes or complex like when you are negotiating the purchase or sale of a business.

For example, let’s take a look at a typical business purchase. Say you get the chance to buy an established business. The current owner tells you the average annual income is $100,000, he wants $350,000 and you can pay it over 10 years at no interest. Let’s see, you get net cash income of $65,000 ($100,000 – $35,000) and build your own business asset in the process. Considering you only make $35,000 right now, that sounds great, doesn’t it?

Well, let’s ask some questions a CPA might ask. First of all, what does the balance sheet look like? What assets will you get with the purchase? Are there any receivables or inventory? Are there any real assets like equipment or buildings? Is the $100,000 really consistent and does it come from the good name of the business or a few contacts the owner has that will disappear when you purchase the company? Is the net income before or after taxes and does it represent real cash available for your living expenses or will cash flow be significantly less?

Not only must you look at the basic business questions, but the manner in which you structure the purchase is critical. If the business in the preceding example is a corporation, you have two choices. You can either purchase the assets or you can purchase stock. Let’s say the only asset of the company is its good name, commonly called goodwill. If you buy the stock, your basis in the company is $350,000, but you won’t be able to deduct any of that cost until you sell the company. If you buy assets, you will have a $350,000 asset, the cost of which you can deduct over 15 years. If your effective tax rate is 30% that saves you $7,000 per year. Would you rather pay less tax now or later?

There are numerous tax and legal matters that come into play when buying a business and the fact is you shortchange yourself if you fail to involve the proper professionals before, during and after the acquisition.

Free Consultation

Areas of Service: Business Sale Salt Lake City, Business Sale Sandy UT, Business Sale South Jordan, Business Sale West Jordan

Bankruptcy Salt Lake City

Bankruptcy Salt Lake City

How to Use an IRA for Asset Protection

Bankruptcy Salt Lake CityMost people do not anticipate a situation in which a creditor will come after their assets, but these situations are more common than you might think. Bankruptcy Salt Lake City For example, say your teenager is involved in a car accident and the injured party files a civil suit – your assets could be vulnerable. Likewise, if you get divorced or must file for bankruptcy, your assets can be attached or garnished.

If you would like to protect your portfolio against the possibility of creditors getting access to your assets – now or after you pass assets on to your heirs – it’s a good idea to understand what accounts are the best vehicles to protect your assets.

Up to $1 million in aggregate of all Individual Retirement Accounts’ assets are protected from creditors if you file for bankruptcy. Moreover, a bankruptcy court has the discretion to increase this cap in the “interest of justice.” Outside of a bankruptcy situation, whether or not your IRA will be protected from creditors is largely dependent on state law. The majority of states shield all assets of a traditional IRA from creditors; slightly fewer (but still most) states offer the same protection for a Roth IRA.

Employer-sponsored plans, such as the 401(k), 403(b), 457(b), SEP IRA and SIMPLE IRA, enjoy unlimited protection under the Employee Retirement Income Security Act of 1974 (ERISA). If you roll over assets from an employer-sponsored plan, they will then be subject to the $1 million limited protection given an IRA in a bankruptcy proceeding, and be subject to state law outside of bankruptcy.

Limited Liability Protection

You can also structure your IRA to wholly own an LLC for the same reason individuals use LLCs in their personal investment and business activities – to limit personal liability. Using a Self-Directed IRA LLC to make investments offers you greater asset and creditor protection than making investments personally. For example, say you purchase rental property under your IRA/LLC and a renter then files a lawsuit as a result of being injured on the property. In this case, only the assets owned by the IRA/LLC are at risk; the lawsuit may not go after your other personal assets.

Inherited IRA

You might be able to protect IRA assets that you plan to leave to your family (other than your spouse) by naming a trust as your designated IRA beneficiary because a trust also enjoys creditor protection. If you do not do this while you’re alive, your heirs can preserve inherited retirement assets by transferring the IRA they inherit to a “see-through trust.” This type of trust enjoys the same tax-deferred treatment that the beneficiary would enjoy had he inherited the IRA directly, but with far better protection from creditors in the wake of a bankruptcy filing or creditor lawsuit.

Be aware that in July 2014, the Supreme Court unanimously upheld a Seventh Circuit decision (Clark v. Rameker) that an inherited IRA was not protected in a bankruptcy proceeding. This was a specific case in which the IRA beneficiary claimed her inherited assets should be protected against creditors, demonstrating that these protections may come under scrutiny going forward on a case by case basis.

Free Consultation

Areas of Service: Bankruptcy Salt Lake City, Bankruptcy Sandy UT, Bankruptcy South Jordan UT, Bankruptcy West Jordan UT

Wealth Management West Jordan UT

Wealth Management West Jordan UT

Wealth Management West Jordan UTWe have strategic alliances with international financial companies to complement the services we provide in financial planning. Wealth Management West Jordan UT These alliances give you information and expertise to assist you in charting out a course of action for achieving your personal financial goals and objectives.

  • Investment Review: Through our alliances, we can provide a custom portfolio analysis and review the risks and returns of specific investments including stocks, bonds, REITs, and limited partnerships. We can also determine an optimal asset allocation for you by taking your unique personal and financial goals and resources into account.
  • Estate Planning: PHG offers estate planning services so you can minimize both federal and state estate tax liabilities. We will endeavor to protect your heirs from the unneeded emotional devastation that can be caused by estate tax levies.
  • Retirement Planning: It is never too early to start planning for retirement. If you want to live the same lifestyle– or an even better one–than you do now, you need to start planning for retirement…NOW. We can analyze your projected income and expenses and suggest investment funding techniques to help you make sure that your golden years 10, 20, and even 50 years from now live up to your expectations. ( Wealth Management West Jordan UT )

Read More

Free Consultation