This video is very informative. I have a debt free house and I was thinking about getting a mortgage because borrowing is very low, this would also open up tax deductions. This video demonstrates another tax free structure. I’m wondering which option is best.
This is terrific!! love the ILTT part that is definitely taking this to the next level. I assume the 30K tax deduction can be used to offset rental income from any other properties. can we carry over this deduction if we don't have enough rental income for the given year?
Clint- You are the best. So, I have a rental I own free and clear. If I put it in a CRT, how long does it have to be in the CRT before I can sell it? Can I put my primary residence ( no debt) in a CRT? I appreciate you mucho mucho.
maintaining CRT might be expensive and the annual fee might be high? Please correct me if I am wrong. The tax saving might not be able to cover those CRT fees. Might be better off paying taxes instead.
Depends on the value of the asset. Supposed you transfer a property valued at 350k. This will give you a 35k tax deduction and you will not pay tax on the trust income until you pull it out. The cost for the total structure would be less than 5k.
i know im a little late to the party but dont forget about charitable donations and how they can reduce your tax burdens. and its something you can do while your alive. IRS PUB 526.
@ClintCoons Hey I'm from Spain and I have a doubt. You talk about getting tax-free while investing CTR but as far as I know if you have an annual income of 16K for renting a house at NY you will only pay 2K taxes per year. So, if the cost of your liability (house) is 200K and by investing CTR you lose your house after dying, this means you will need 100 years to be worthwhile. I mean doing CTR seems to avoid 2K annual taxes that is great but if you lose your house... you would never recover the price you paid for the house. There is sth I can't see bcs it doesn't make any sense to me if I take taxes that are paid there...I hope my explanation is clear... Thanks in advance
Isn't there a minimum annual distribution requirement from the CRT to the beneficiary...5% of the value of the trust at the beginning of each year, ie January 1?
No. The CRT payout is set up in the trust document and it has many different options depending on the type of trust you create. The 5% you refer to has to do with the minimum amount a foundation must expend each year.
I get the initial tax deduction benefit and the tax free growth in the CRT, but as the value in the CRT grows, the initial tax deduction becomes less material. As the value grows, and the rental income grows, I would still have to pay taxes on it. So i'm not seeing much benefit, am I missing something? (thank you in advance)
You only pay taxes on the money withdrawn. Think of it like an IRA. You only pay taxes when you remove the money not while it is growing inside of the IRA.
I am confused. On one hand, you said the income is tax free ( is it because of the 30k deductible ?); on the other hand, you said I need to let the income accumulate in the trust, otherwise I will need to pay tax for it. So … is it tax free or not ?
Alex I don't know of any common mistakes other than how the entity works. Some individuals assume their tax deduction will be much higher because they do not understand how it is calculated.
I am in Australia - so not really sure if these structures will apply But I am SOO inspired by the video that I am going to find similar proposals down under - because we get tax on our Superannuation (~401k) at 15 to 45%, capital gains up to 45%, income tax up to 45%, etc. (you see the trend). Thank you
Hmm. I think I remember a situation where a person set up a similar structure and did not take a tax deduction for the transfer into the trust and the tax court allowed it to stand. The issue was self dealing rules around charitable beneficiary trusts. I think I will spend some time looking into this strategy. Thanks for the idea and sorry I cant give you a more definitive answer.
Question for you, while having a LLC paying taxes as a S Corp can I have the LLC pay for my family health insurance with my company CC or do I have to use payroll to pay for it. Thx
@@ClintCoons how do you set up a medical reimbursement for health insurance. Do I have to do payroll or can I not just pay for it with my business credit card. Thanks
@@johnaustin8574 You would prepare a resolution adopting a medical reimbursement plan and have the managers sign it. You would also want to covert your tax status to a C-Corp if you want to pick up out of pocket medical. The S-Corp will pay your premiums and you will pick up the amount as income via your w-2 but not subject to SS tax. You then take a deduction on your 1040 for the premiums. See www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues
Imagine you are 40 years old and you set up a CRT and let say you got 40 more years to live... Well imagine the hundreds of thousands of dollars you save in tax exemptions over that 40 year period of time...
@viracitycorp2577 @knguyen215 Hey I'm from Spain and I have a doubt. You talk about getting tax-free while investing CTR but as far as I know if you have an annual income of 16K for renting a house at NY you will only pay 2K taxes per year. So, if the cost of your liability (house) is 200K and by investing CTR you lose your house after dying, this means you will need 100 years to be worthwhile. I mean doing CTR seems to avoid 2K annual taxes that is great but if you lose your house... you would never recover the price you paid for the house. There is sth I can't see bcs it doesn't make any sense to me if I take taxes that are paid there...I hope my explanation is clear... Thanks in advance
