Publications

Tax Update: Income tax vs. estate tax when minimizing your tax burden
- June 1, 2024: Vol. 11, Number 6

To read this full article you need to be subscribed to Real Assets Adviser

Tax Update: Income tax vs. estate tax when minimizing your tax burden

by A. Taylor Custis

How can you best plan for the tax responsibilities of generational wealth? It all starts at the intersection of two tax systems: income taxes and transfer taxes (estate, gift and generation-skipping transfer taxes). Balancing the impact of these two systems is critical to the wealth planning process.

You are likely familiar with the demands of federal, state and local income taxes. Depending on your income, the federal income tax rate on ordinary income, such as wages, can be as high as 37 percent. Federal capital gains taxes on investment appreciation can be as high as 20 percent. In addition, the net investment income tax can apply at 3.8 percent, depending on your income level.

In terms of transfer taxes, the good news is that the federal estate and gift tax exemption currently is $13.61 million per person, or $27.22 million for a married couple, although the exemption amount is scheduled to be cut in half at the end of 2025 unless congress acts.

The bad news

Forgot your username or password?