Many alumni can’t get tickets to their alma mater’s home games unless they make a special “donation” to the university. Under current law, 80 percent of such contributions are deductible. The Obama administration has proposed closing the loophole to raise an estimated $2.5 billion over the next decade.
The blind are eligible for a higher standard deduction; the deaf or otherwise disabled don’t get special treatment. A songwriter who sells his music catalog pays a capital gains tax on the earnings. But painters, photographers, writers, and other artists selling a body of work are subject to income taxes, which can be significantly higher.
Mixed (Car) Signals
Buyers of energy-efficient hybrid and electric cars are eligible for a federal tax credit of as much as $7,500. Yet the tax code also encourages businesses to buy gas-guzzling SUVs, vans, and pickup trucks by making it easier to depreciate the cost of a vehicle that weighs more than 6,000 pounds.
Buyers of old master paintings or vintage Ferraris can enjoy their collections while getting a tax break: First they set up a nonprofit museum that they control, then donate their collection to it. The museum might need to open to the public only a few days a month.
A GRAT Dodge
The grantor retained annuity trust allows individuals to place assets into a trust in exchange for an annuity payment. Any growth in the assets above the payment goes to their heirs tax-free. Casino owner Sheldon Adelson used GRATs to transfer at least $7.9 billion to his heirs from 2010 to 2013, avoiding a $2.8 billion bill.
The Value of an Education
If you withdraw money from a 529 savings plan without using it for education, you’ll pay a 10 percent penalty. But that one-time levy is small compared with the cumulative drain of years of taxes on capital gains and dividends an ordinary investment sees, making the plans an attractive vehicle for anyone.
See related content on ThinkAdvisor’s 22 Days of Tax Planning Advice: 2015 home page.
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