WiserAdvisor – Blog

Main Menu

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
logo
I Want to Take Charge.
HELP ME FIND AND COMPARE TOP VETTED FINANCIAL ADVISORS IN MY AREA.

FINRA/SEC Registered Advisors

  Your Information is Safe and Secure

WiserAdvisor – Blog

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
Financial Planning
Home›Financial Planning›Six Gifting and Tax Strategies to Leverage Amid the Coronavirus Outbreak

Six Gifting and Tax Strategies to Leverage Amid the Coronavirus Outbreak

By WiserAdvisor Insights
April 29, 2020
4010
0
Tax Strategies to Leverage Amid the Coronavirus Outbreak

The world seems to be grappling with an unprecedented crisis right now. The Coronavirus pandemic is far from what the human race has ever witnessed. While the physical and mental health effects of COVID19 have been a concern for many, the financial repercussions of the outbreak can also not be ignored. With economic growth on a standstill, the market has seen a considerable downturn in the last few weeks. However, even in overwhelming times like these, one cannot shy away from their responsibilities and duties towards their family and the wider community. Here are some gifting and tax strategies to leverage amid the Coronavirus outbreak.

1. Direct payments and cash gifts

Many people have lost their jobs as a result of the lockdown. Some employees are also experiencing pay cuts. This is a tough time for families as investors have been forced to sell off their securities at low prices in the market. Individuals with a surplus of funds can take this opportunity to help those suffering around them. Cash gifts to children or grandchildren are an excellent way to start. As of 2020, an individual can give up to $15,000 in a year as a gift without incurring any tax consequences. The annual limit for married people is even higher, at $30,000 per annum. Trends show that most people wait until the end of the year to gift their loved ones, as they like to be prepared for the worst and keep liquid funds ready in case of an emergency. However, given the current state of affairs, this can be a good time to make an exception and go ahead with the cash gifts in the first half of the year. Moreover, with the market at an all time low, the recipients can utilize the cash gifts for investing for the future.

2. Converting to a Roth individual retirement account (IRA)

When a traditional IRA is converted to a Roth IRA, the account owner pays the income tax on the amount that is converted. With the markets experiencing a low, converting into a Roth IRA right now can be a great strategy to reduce tax liability. Furthermore, the funds in the account will grow tax-free till until the account matures. This means that the beneficiaries will not be liable to pay any additional income tax on the withdrawals.

3. Offering loans within the family

When an individual lends money to other family members, the transaction is known as an intra family loan. These loans are granted on unique interest rates, also known as applicable federal rates or AFR and are pre-determined by the Internal Revenue Services (IRS). Intra family loans enjoy a much lower rate of interest as compared to commercial loans. If there are people in a family who are struggling to pay off a high interest mortgage, home loans, education loans, or vehicle loans, they can consider taking an intra family loan at a lower rate of interest to refinance the original loan.

4. Grantor Trusts

Grantor trusts are effective investment instruments used to pass on funds to beneficiaries without any tax liabilities. Trusts like grantor retained annuity trusts (GRATs) and charity lead trusts (CLTs) are irrevocable trusts that are set by an estate owner. The owner of the trust receives annuity for a few years, and the remaining portion of the trust is passed on to the beneficiaries without any tax deductions. The tax is only paid by the owner at the time of establishing the trust and then never again. The rate of interest for such trusts is fixed by the IRS.

5. Charitable donations

As of 2020, an investor can deduct 100% of their adjusted gross income for donations made towards a public charity. With many industries of the country struggling to make ends meet due to the current pandemic, charitable contributions can be a great way to help people. But for individuals donating with the aim of saving tax, it is important to note that only qualified donations under Section 501(c)(3) of the Internal Revenue Code are tax exempt. Charities involved in religious and educational activities, prevention of cruelty to animals, along with organizations like the Red Cross, museums, etc. are considered valid for tax deductions.

6. Lifetime Gift Tax Exemption

The gift tax exemption for the year 2020 is $11.58 million for an individual. This implies that a person can give away gifts of a value of $11.58 million in their entire life without incurring any gift taxes. In the case of a married couple, the amount is further doubled at $23.16. Apart from a small cash gift, people can also consider lifetime gift tax exemption and give away their assets to their future generations. Moreover, the limit is expected to drop by half by the year 2026, so this may be the right year to use the exemption.

To sum it up

The COVID 19 pandemic is causing financial anxiety in many households. The ambiguous future and a lack of enough information and innovation to treat it is also a contributing factor to the falling economies. While the lockdown gets extended around the world, it is important now than ever to help the people in need. The points mentioned above can not only provide for families but can also bring tax relief to the individual helping them.

If you find any of these methods useful and need help in understanding how to proceed, you can get in touch with financial advisors and leverage their professional knowledge on how to manage your funds and help others at the same time.

Tags#financial planning #tax planning #financial calendar #personal finance
Previous Article

Know How You Can Use Municipal Bonds ...

Next Article

Here’s How You Can Check Your Portfolio’s ...

0
Shares
  • 0
  • +
  • 0
  • 0
  • 0
  • 0
WA-icon

WiserAdvisor Insights

A team of dedicated writers, editors and finance specialists sharing their insights, expertise and industry knowledge to help individuals live their best financial life and reach their personal financial goals. We believe that there is no place for fear in anyone's financial future and that each individual should have easy access to credible financial advice.

Related articles More from author

  • Financial Planning

    How to know If Index Annuities are right for you

    October 8, 2019
    By WiserAdvisor Insights
  • Personal--Finance
    Financial Planning

    Important Aspects of Personal Finance in A Changing Economy

    March 18, 2020
    By WiserAdvisor Insights
  • Financial Planning for a Baby
    Financial Planning

    Financial Planning To Prepare For a New Child

    June 20, 2022
    By WiserAdvisor Insights
  • Frugality-with-minimalism
    Financial Planning

    Importance of Balancing Frugality with Minimalism

    August 28, 2019
    By WiserAdvisor Insights
  • Tax and Financial Planning
    Financial Planning

    Does Your Financial Plan Account for Higher Taxes?

    October 11, 2022
    By Jonathan Dash
  • Tax Season
    Financial Planning

    Be Aware of These Remote Worker State Tax Liabilities Before the Tax-Season

    February 25, 2021
    By WiserAdvisor Insights

You might be interested

  • Investment-Portfolio
    Investment Management

    How to Build a Complete Investment Portfolio

  • short-term
    Financial Planning

    How to Invest for Short-Term Goals within the Next 10 Years

  • Retirement-Corpus
    Retirement Planning

    How to Find the Right Withdrawal Rate from Your Retirement Corpus?

Don't miss out! Get our Helpful Financial Tips Newsletter

  • Popular Posts

  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019
  • Retirement-Planning

    Retirement Planning checklist

    By WiserAdvisor Insights
    July 8, 2019
  • Why investing for goals is the right way of investing

    Why Investing for goals is the right way of Investing?

    By WiserAdvisor Insights
    July 16, 2019
  • Portfolio diversification

    5 Dangers of Over-Diversifying your Portfolio

    By WiserAdvisor Insights
    July 26, 2019
  • Financial Planning for couple

    The Complete Guide on Financial Planning for Couples

    By WiserAdvisor Insights
    August 1, 2019
  • Roth-IRA

    Can You Open a Roth IRA After You Turn 60?

    By Jonathan Dash
    December 19, 2021

Categories

  • Business Finance (2)
  • Education Planning (29)
  • Estate Planning (22)
  • Financial Advisor (1)
  • Financial Advisor Guide (36)
  • Financial Planning (123)
  • Investment Management (72)
  • Personal Finance (13)
  • Portfolio Management (1)
  • Retirement (30)
  • Retirement Healthcare (1)
  • Retirement Planning (79)
  • Retirement Plans (1)
  • Uncategorized (2)

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.

WiserAdvisor is America’s oldest and largest independent network of screened financial advisors. We make it easy and convenient for consumers to find and connect with advisors in their area. We have successfully helped over 100,000+ individuals find their best financial advisor since 1998 with no match fees, no commitments, no obligation, and complete confidentiality. WiserAdvisor has been featured in The Washington Post, The Washington Journal, ABC, CBS, Yahoo and has been seen in numerous other leading financial news and information websites.

Follow Us

  • Recent

  • Popular

  • What to Do If You Are 50+ With Over $2 Million in Your 401(k)

    What to Do If You Are 50+ With Over $2 Million in Your 401(k)

    By WiserAdvisor Insights
    September 27, 2023
  • What is a Vested Balance In Your Retirement Account?

    What is a Vested Balance In Your Retirement Account?

    By Jonathan Dash
    September 20, 2023
  • The Most Important Factor You’re Probably Overlooking In Your Retirement Planning

    The Most Important Factor You’re Probably Overlooking In Your Retirement Planning

    By WiserAdvisor Insights
    September 13, 2023
  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019

Contact Us

Corporate Headquarters

12150 Monument Drive, Suite 700
Fairfax, VA, 22033

Business Hours

8:30 AM – 5:00 PM EST (Monday – Friday)

Email Address

wa.assistance@wiseradvisor.com

Phone Number

(703) 651-2060

Fax Number

(703) 259-4487

  • Privacy Policy
  • Terms & Conditions
© Copyright 2023 WiserAdvisor.com. All Rights Reserved.