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Yahoo
13-04-2025
- Business
- Yahoo
Can Everyday Americans Use the Same Tax Loopholes as Trump?
Breaking with presidential tradition, President Donald Trump refused to release his personal tax returns to the public. That sparked a bitter legal debate a few years ago, eventually resulting in him being forced to do so. Read More: Find Out: It quickly became clear why President Trump didn't want to share them. In some years, he paid no federal income taxes at all, and Bloomberg reported that the highest effective tax rate he paid during the published years was just 4.1%. How did he pay so little in taxes despite having significant income and wealth? More importantly, how can you pull the same maneuvers? Here are seven tax loopholes President Trump used that might benefit your tax filings, too. Real estate investors can deduct the value of the building itself, spread out over time. 'Depreciation is one of the biggest tax advantages in real estate,' said Austin Glanzer, owner of 717HomeBuyers. 'It allows investors to deduct the 'wear and tear' on a property, even if it's actually going up in value. It's a strategy used by major investors like Trump, but everyday Americans can use it too.' This deduction offsets their rental income and other investment income, such as dividends or capital gains. Residential real estate investors divide the value of the building by 27.5 and can deduct that each year for the first 27.5 years of ownership. Commercial investors must spread the depreciation over 39 years. That said, real estate investors can accelerate that depreciation through techniques such as cost segregation. Many parts of the building, such as appliances, can be depreciated much faster. That lets investors take a larger deduction in the first few years of ownership. You don't have to go out and become a landlord, either. By investing passively in real estate syndications, you get all the tax benefits without the headaches. Consider joining a real estate co-investing club to go in on these with other investors. Discover Next: The tax code allows real estate investors to swap a lower-cost investment property for a more expensive one, deferring capital gains taxes until they sell the new one. These come with some hoops to jump through, however. Investors have to hire a qualified intermediary to handle their proceeds and file the legal paperwork, identify a new property to purchase within 45 days of selling the old one and close on the new one within 180 days. The wealthy earn a higher proportion of their income from capital gains from investments rather than earned income. Arron Bennett, CEO at Bennett Financials, said, 'Capital gains — profits from selling assets like property or stocks — are taxed at much lower levels than ordinary income. Trump has made savvy investments in real estate and stocks, setting himself up to profit from tax-favored treatment of investment returns.' To take advantage of the lower long-term capital gains tax rates, you have to hold the asset for at least a year before selling. Sure, you could sell an asset to cash out its value. But then you'd owe capital gains taxes. What if you borrowed money against it instead? Imagine you buy a rental property with a 15-year mortgage. Over 15 years, you collect a bit of rental cash flow, and your renters effectively pay off your mortgage balance for you. After 15 years, your property has appreciated by hundreds of thousands of dollars. You want to cash that out, but you don't want to pay capital gains taxes. So you take out a new 15-year mortgage and do it all over again. You get to cash out the equity, you get to continue collecting cash flow, and you get to write off the mortgage interest as an expense. Win, win, win. No, you can't just claim that the Vegas family vacation you took was a business trip and write off the expense. Unless you actually do some business on the trip. Imagine you attend a conference for part of that family vacation. Or you meet with an important client or supplier. Now you can make a defensible case to the IRS that it was, in fact, a business trip if they ever audit you. Businesses have up years and down years. Sometimes, they manage to show losses on paper even while earning money. Look no further than the business deduction example above. 'One of the loopholes that President Trump has used to reduce his tax burden is carrying forward a net operating loss (NOL),' said Kari Brummond, accountant at TaxCure. 'If you have an NOL, you can carry it forward indefinitely and use it to offset up to 80% of your income.' Brummond helps illustrate how it works with an example. 'Say you claim an NOL of $100,000 in 2025. In 2026, you have $50,000 of income. The NOL offsets $40,000, so you only pay taxes on $10,000 of income, and you still have $60,000 of your NOL to carry forward for future tax years.' In 2025, the estate tax exemption rose to $13,990,000, per the IRS. But it may fall down again if the Tax Cuts and Jobs Act provisions expire, and many states impose their own lower exemptions. Bennett points out that the president has an answer for that as well. 'Trump has employed trusts to keep his assets out of reach and limit taxes. Trusts allow transferring wealth to future generations without the use of estate taxes.' The benefits don't end at taxes, either. 'They also grant protection of assets against lawsuits. Many high-net-worth individuals utilize these tactics to safeguard assets and reduce taxes on the assets.' You don't have to be ultra-rich to take advantage of the strategies that Trump uses. Still, some of these cost more money to set up than others. Hiring an attorney to structure a trust for you costs real money and comes with significant risks, so put that last on your priority list for reducing your tax burden. More From GOBankingRates 5 Luxury Cars That Will Have Massive Price Drops in Spring 2025 4 Things You Should Do if You Want To Retire Early How Far $750K Plus Social Security Goes in Retirement in Every US Region 25 Places To Buy a Home If You Want It To Gain Value This article originally appeared on Can Everyday Americans Use the Same Tax Loopholes as Trump? Sign in to access your portfolio
Yahoo
10-04-2025
- Business
- Yahoo
Tax Day Countdown: 4 Tax Rules To Know Before Converting Your IRA Account
Roth IRAs are a popular retirement savings and investment tool, especially for those expecting to be in a higher tax bracket in retirement, because of the tax advantages of certain IRA contributions to a Roth. However, converting your Roth account also comes with immediate tax consequences that require careful planning if you are considering doing so this tax year. Learn More: Find Out: Retirement plans in the United States can get complicated, especially when you factor in taxable income or modified adjusted gross income (MAGI). Here are four tax rules to understand before you convert your IRA to a Roth account to avoid costly surprises and maximize benefits. Converting an IRA to a Roth account means moving money from traditional IRA contributions you've made or from another pre-tax retirement account into a Roth IRA. It makes all pre-tax contributions and earnings taxable during the year of the conversion. In the future, qualified withdrawals from the Roth IRA will be tax-free. 'A conversion is beneficial if you expect to be in a higher tax bracket in retirement,' said Ines Zemelman, an IRS-authorized enrolled agent, tax professional and founder and president of TFX, a tax advisory firm. 'If you are planning to retire abroad, consider cross-border tax implications.' Zemelman recommended spreading the conversions across multiple years to avoid higher tax brackets while minimizing tax liability. The ideal time for a Roth conversion is during the early retirement years, before Required Minimum Distributions (RMDs) or Social Security begin. 'It's beneficial for legacy planning, as Roth IRAs pass tax-free to heirs,' Zemelman said. 'Converting funds before retiring abroad can avoid unfavorable or double-taxation in some countries.' In addition, many employers offer in-plan Roth conversions, said Elizabeth Schleifer, a financial advisor at Armstrong, Fleming & Moore, Inc. 'Employees can transfer money from their traditional (pre-tax) 401(k) to a Roth 401(k) in the same plan,' Schleifer said. 'Employees pay taxes on the converted amount. So, it makes sense to do this if you have an unusually low-income year, either due to a large deductible expense or a drop in income.' Be Aware: A Roth conversion increases your adjusted gross income (AGI) for the year, which can affect several areas of your financial life, not to mention tax deductions. 'A higher AGI may lead to increased Medicare premiums under IRMAA (Income-related Monthly Adjusted Amount), taxation of a larger portion of your Social Security benefits or reduced eligibility for tax credits like the Child Tax Credit or the Saver's Credit,' said Arron Bennett, founder and CEO of Bennett Financials. 'These considerations should be part of an overall financial plan to ensure the conversion aligns with your broader goals.' Bennett said that incorporating other investments, such as in the oil and gas sectors, can help mitigate the tax impact of the conversion and reduce its effect on other financial areas and tax dollars you spend. 'For example, a current oil and gas investment conversion allows for 60 cents on the dollar in tax mitigation, meaning you're only taxed on 40% of the amount being rolled into the Roth IRA,' Bennett said. 'Typically, tax mitigation for these types of conversions is around 42 cents on the dollar. Once converted, the funds grow tax-free, and if specific conditions are met, withdrawals in retirement are also tax-free.' State income taxes are often applicable for Roth conversions, depending on where you live. Your location can greatly affect your ordinary income as well as your earned income. For example, Bennett said Florida and Texas don't impose state income taxes, while California or New York can impose significant state income taxes on conversions. 'It's crucial to understand your state's tax policies and factor them into your planning,' Bennett said. 'If you're planning to relocate to a no-tax state, consider postponing the conversion until after the move to maximize savings.' The bottom line is that whether it is stocks, bonds or even a retirement account, investing involves risks. However, when it comes to your tax situation there are ways to escape penalty-free, or at least lower your tax liability. If you are age 50 or older and are considering converting your traditional IRA to a Roth IRA, make sure you understand the tax rules that will help make that transition a smooth, and more affordable, one. Caitlyn Moorhead contributed to the reporting for this article. More From GOBankingRates 5 Types of Vehicles Retirees Should Stay Away From Buying 5 Cities You Need To Consider If You're Retiring in 2025 4 Things You Should Do if You Want To Retire Early 10 Cars That Outlast the Average Vehicle This article originally appeared on Tax Day Countdown: 4 Tax Rules To Know Before Converting Your IRA Account Sign in to access your portfolio
Yahoo
16-02-2025
- Business
- Yahoo
6 Things the 1% Are Doing With Their Roth Accounts (And Why You Should Pay Attention)
When it comes to building wealth, the ultra-wealthy aren't just saving money — they're strategically maximizing every financial tool at their disposal. One of their favorite vehicles? The Roth IRA. Be Aware: Try This: 4 Unusual Ways To Make Extra Money That Actually Work Here's what financial experts say the 1% are doing right and how you can follow their lead, even without a seven-figure income. The wealthy understand that timing matters when it comes to Roth contributions. 'By contributing the annual maximum limit early in the year rather than spreading it out, they allow the investment to compound and grow tax-free for a longer period,' said Arron Bennett of Bennett Financials. Even if you can't contribute the maximum, starting early gives your money more time to grow. According to Bennett, you can automate your contributions to ensure you're consistently funding your Roth IRA. Learn More: Income limits don't stop the wealthy from accessing Roth benefits. 'Even individuals whose salaries actually exceed the Roth IRA contribution limits can contribute with a 'Backdoor Roth,'' explained Anthony DeLuca of RetireGuide. 'This involves contributing non-deductible money into a traditional IRA and then converting these funds into the Roth.' The 1% often think beyond traditional investments. 'Many of the wealthiest individuals use a self-directed Roth IRA, which allows them to invest in a wide variety of alternative assets — such as real estate, private equity and even cryptocurrency,' Bennett said. Smart timing can lead to significant tax savings. 'Ideally, you would want to invest in a Roth IRA when you are in a lower tax bracket. Once your salary grows, deferring taxes into a traditional 401(K) or IRA becomes a better tax strategy option,' DeLuca explained. The wealthy understand that tax-free withdrawals can be crucial for managing healthcare costs. 'The average cost of long-term healthcare in America ranges from $35,000 to $108,000 a year. Having a Roth IRA bucket is so valuable, because money can be pulled for this without paying unnecessary taxes,' DeLuca said. The 1% leverage Roth accounts for generational wealth transfer. 'Roth IRAs don't have required minimum distributions (RMDs) during the owner's lifetime, so the account can keep growing tax-free. Plus, when passed on to heirs, the withdrawals remain tax-free for them, as well,' Bennett explained. You don't need to be among the wealthiest Americans to use these strategies effectively. As DeLuca said, 'The 'average person' can do exactly what the 1% does. It's about investing and staying disciplined.' By implementing these approaches within your means, you can make your Roth IRA work harder for your financial future. More From GOBankingRates4 Unusual Ways To Make Extra Money That Actually Work How Much Would I Save if I Cut My Credit Card Interest to Low APR for a Year? How Middle-Class Earners Are Quietly Becoming Millionaires -- and How You Can, Too This article originally appeared on 6 Things the 1% Are Doing With Their Roth Accounts (And Why You Should Pay Attention) Sign in to access your portfolio
Fox News
13-02-2025
- Entertainment
- Fox News
Blake Lively's clash with Justin Baldoni ‘fatally compromised' his career: expert
As he continues his legal battle against Blake Lively, Justin Baldoni faces a whole new wave of challenges that could potentially harm his career and put his financial security at risk. After Lively accused Baldoni of sexual harassment, retaliation and infliction of emotional distress in a December lawsuit, sources close to the actor and director told Fox News Digital that the claims have since cost him three jobs and hundreds of millions of dollars. "Justin Baldoni's career is going to nosedive because of this legal battle," Ryan McCormick, a Reputation Management Expert & Managing Partner at Goldman McCormick PR, told Fox News Digital. "It's not because of his acting ability or following," he continued. "Even if all accusations are proven false, I think in the eyes of studios, he's radioactive. Entertainment companies take a risk on each film, not knowing if it will connect with the masses. With Baldoni, there's now added perils of not knowing if another legal battle will manifest with his future co-stars." "In addition, the actor has run awry with one of Hollywood's most powerful couples," he added. "Their sphere of influence goes far beyond what the public sees. I can see Blake Lively and Ryan Reynolds subtly letting film studios know that they will not do business with them if they do business with Baldoni." "Also, Lively has 44M followers on Instagram and [Ryan] Reynolds (Lively's husband) has 53 million. Baldoni has 4 million. For all the negative press Lively has gotten in the past year, she can recover from this legal hurricane. Baldoni's brand and marketability have unfortunately been fatally compromised," he concluded. Arron Bennett, founder of Bennett Financials, told Fox News Digital that Baldoni could face "several potential financial consequences" due to the legal battle. "Three job losses and 'hundreds of millions of dollars' in potential earnings indicate serious financial stagnation," said Bennett. "Being an actor-director like Baldoni, ongoing projects and future deals stand as vital income sources. Studios or production companies might reevaluate their willingness to work with him if they believe he presents too much legal risk during the lawsuit, which could then harm his capacity to land new roles or direct future projects." "For all the negative press Lively has gotten in the past year, she can recover from this legal hurricane. Baldoni's brand and marketability have unfortunately been fatally compromised." Even if Baldoni claims victory in court, he will still face a significant financial loss. "Engaging in high-profile legal conflicts claims high financial costs and potential settlements plus damages which might drain his available cash if the case extends over time," Bennett said. "Winning the legal battle will not relieve him from paying attorney fees and PR crisis management costs and lost earnings." Natalie Trice, a brand and PR expert for Natalie Trice Publicity, said the Baldoni-Lively battle is a true testament to how quickly things can take a turn for the worse, both professionally and personally. "Let's be real, losing three jobs and potentially hundreds of millions of dollars shows how legal battles affect Hollywood figures beyond the courtroom and how fast things can escalate," she told Fox News Digital. "Studios, sponsors, and investors assess risk quickly, and this could reshape Baldoni's future opportunities, and if whoever 'wins' I fear there will be massive losses on both sides that could ripple on for a longtime." "Nowhere more than Hollywood is your brand is your currency, and the longer this plays out, the harder it becomes for him to reclaim control of the narrative, especially as more and more stories are leaked," she added. But Bennett said there are ways Baldoni can recover if and when he takes the financial hit, including strategic brand rehabilitation, diversifying income streams, legal and financial risk mitigation and alternate revenue sources. "PR tactics combined with selected interviews and philanthropy provide Baldoni with opportunities to shape public opinion," said Bennett. "By pursuing producing and writing roles along with executive positions or media investment ventures, he can maintain stable income levels despite limited acting-directing opportunities," he added. WATCH: JUSTIN BALDONI RELEASES UNEDITED 'IT ENDS WITH US' FOOTAGE FEATURING BLAKE LIVELY In December, Lively detailed allegations of sexual harassment, retaliation, intentional affliction of emotional distress, negligence and more against Baldoni and film producer Jamey Heath in a complaint first filed with the California Civil Rights department and later in federal court in December. In response, Baldoni filed a $400 million lawsuit against Lively and Reynolds, accusing them of civil extortion and defamation. His team then released unedited footage from the set of "It Ends With Us" that they claim refutes Lively's previous accusations of sexual harassment. However, Lively's legal team claims the footage bolsters the actress's allegations. After the release, Lively's legal team demanded a gag order be issued against Baldoni's lawyer. On Jan. 23, Baldoni's lawyers filed a response, calling Lively's gag order attempt an "intimidation tactic" and "tactical gamesmanship." Baldoni and Lively's legal teams were in federal court on Feb. 3 where the judge ordered that they follow the New York Rules of Professional Conduct, which limit speaking to the press. Neither party will be permitted to make statements to the press that have a "substantial likelihood" of prejudicing a jury. However, the legal teams will be allowed to defend their client in the media against publicity not created by either side.
