You can give an amount not to exceed $13,000 to each one of your children, up to $52,000 per family without filing a gift tax return. You must file Form 709, if the amount allocated for gifts exceeds $52,000.
If you intend to make investments for your child, you may use a Section 529 plan. If your child uses the money for qualified college expenses, all income earned may become tax-free. In addition, 20% of the money your child held in his name is considered to cover his tuition fees.
Investment Strategies - Invest In Growth Stock
You can give your child growth stocks or growth stock mutual funds, from companies that invest their profits for future growth. The child will pay no tax currently, as the companies are paying little or no current dividends.
Municipal Bonds Are Tax Free
You can also buy a municipal bond for your child that matures after the child’s 19th birthday. The interest is not subject to federal income tax.
Employ Your Children
You may be able to employ your children and pay them for the work they perform. The standard deduction for a child or a dependent is the greater of $950 of unearned income or the sum of $300 plus any earned income. In this way, your business qualifies for a tax deduction at its tax rate and the amount paid to your child will be taxed at the child’s tax bracket.
Less Taxable Income By Investing In Tax Managed Mutual Funds
You may choose to invest in tax-managed mutual funds. These funds usually generate minimal taxable income.
Invest In U.S. Saving Bonds
You may give U.S. Saving Bonds to your child. You do not have to pay taxes on bond interest until the child is no longer subject to kiddie tax. Then, the interest will be calculated at the child’s tax bracket.
Here at Joe Mastriano P.C., we understand the entire IRS process and what it takes to get your problem resolved. We’ve been in business now for over 30 years and have the experiences you need to make sure we get your debt reduced as low as possible and give you great investment strategies. Do yourself a favor and visit our website. If you like what you read and want to talk to a specialist, call us today at (713)774-4467.
