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Wealth Health Managing Director Rich Coppa on the tax breaks Americans can use to reduce their tax burden.
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Mitt Romney got lots of media attention for recently releasing his 2011 tax returns mr.
Romney paid an effective tax rate of fourteen point -- percent.
While many middle American in come -- Americans and wealthy individuals paid.
A lot -- -- but it turns out there are tricks to paying as much as mr.
Romney did he would mall rich copper managing director of wealth health financial planning rich thank you for being here is so OK so a total this money he's only paying an effective rate of fourteen point 1% but he did break the rules he does play by the rules he was given.
Exactly you know I don't even that I don't like it but that's not his fault that's the thing and I don't think people realize it's a character that income I mean let's face it yeah.
Mitt Romney like you know buffet gone back earlier this year was talking about.
A lower rate compared to secretary the reality is these people are paying.
Their fair share based on capital gains mostly investment income tenacity and it's not ordinary income and I think people -- to realize earned income is taxed at a much higher rate.
Then passive income investment so what can people out -- due to.
Followed mr.
Romney's lead.
Others did a number of things you can do yeah you know as hell ours to help out right I'm not sure we're gonna get down that low but for someone who's you know an ordinary turner about absolutely can take advantage of charitable deductions and -- we talk about this often.
Very important that to charitably inclined and you're willing to part with the money -- global deduction use appreciated stock if you have that so you don't pay capital gains on it.
There's always I think of great benefit of right you know contributing to your retirement plan some people might say you're converting you know what could otherwise be capital gain or dividend.
I ain't -- into ordinary income in the future but the reality is the compound the -- of that deferral.
For hopefully 2030 years is gonna in my view far outweigh short differential -- in many cases get matching of course that's free money to get matching -- of people I think are forgetting if they make -- -- dividends are likely to be tax at least we're we're uncertain right now but likely to go up to ordinary tax rates and that's not -- -- forget the the Medicare tax new investment income tax.
That's going to be another coldly plan as -- -- so much uncertainty of what's coming down the -- it's really difficult all right so it's kind of make charitable contributions contribute to the 401K hottest tax losses what you mean by that yes so I mean this is something that I think you know as an investment advisor we look at this throughout the year in the idea to take advantage of losses meaning.
That the amount of income -- -- not that you paid for your investment is actually gone down.
Rather than just hold out waiting for that hopefully come back to my advantage of the fact that there's a loss you pay ten dollars -- trading at five.
Sell -- book that five dollar loss you can use it to offset capital gains sometime in the future.
Benefit there if you don't use it this year carries over indefinitely into future years as well you can do that with -- individual stocks you can also do that with mutual funds as well so good tip.
Gift assets to kids.
-- you know.
That's as someone that I believe really and gifting just for number of reasons known as you have this huge exemption.
But talking about you know middle income people you don't have to have a lot of money to.
Gift that exemption away the idea is to you know put some money into the next generation have -- income and capital gains tax at the younger generations rate be aware of something called kiddie tax.
That's out there and also you know he might be reducing your state tax and benefit in the kids at the same time just -- running out of time make your hobby into a business voters say comic and hobby into business the idea there is you know there's a lot of people have obviously -- desirous of moving forward with them.
Really make a real business there's some real great benefits to -- -- small business I mean there's risks involved of course but the reality is you can offset your income with expenses relative to.
You know equipment services computers -- like that you also have the ability to contribute to self employed.
Pension plan which has a much higher limitation on their 401K plan or an IRA -- -- sock away some money.
Each year and you know you have some benefits that that you otherwise wouldn't if you just made -- -- -- -- -- -- to get it down to Romney region of fourteen point one but some very great tips rich couple think -- some.
