No one likes paying taxes. Preparing your annual tax return in Pennsylvania can be a major nuisance, especially if you have multiple sources of income or other complicating factors.
Whether you have a simple or complex estate, there is a fair chance that you could be paying less in taxes. Streamlined tax preparation services do make the process simpler, but they have also prevented many Americans from understanding the full breadth of options available to them.
Our Pittsburgh tax planning CPA can help you minimize the impact of income and estate taxes. Our team at the Mt. Jackson Group takes a big picture approach to our suite of services and aims to help you make the most of your resources. One of our partners is a certified public accountant (CPA) who can evaluate your tax situation and provide the attentive and sophisticated guidance you deserve. If you are a high-net-worth individual worried about estate taxes, we can help you proactively prepare and take steps to safeguard and maximize the value of your estate.
Many digital tax preparation services urge Americans to take the “standard deduction” when preparing their income taxes. In lieu of itemizing deductions, this approach allows you to deduct a flat fee. The amount of this deduction is regularly adjusted for inflation.
The standard deduction is convenient and allows you to move through the preparation and filing processes faster, but it often not the most advantageous tax strategy. While it takes more work, itemizing your tax return can potentially produce significant savings. However, it requires careful planning and recordkeeping. The Internal Revenue Service (IRS) may later require that you prove you qualify for a deduction or credit.
It is also important to understand the difference between a tax deduction and a tax credit. A deduction reduces your total taxable income, while a credit lowers your final tax bill. Both will ultimately work to reduce what you owe to the IRS.
Examples of common tax deductions and credits include:
- American Opportunity credit – itemizable when you seek a college education
- Charitable contributions – itemizable when you donate qualifying assets to philanthropic organizations
- Child tax credit – itemizable when you are a parent
- Home office expenses – itemizable when you exclusively use a portion of your home as an office space
- Medical expenses – itemizable when you incur healthcare costs
- Mortgage interest – itemizable when mortgage payments on your primary home go toward addressing interest
- Property taxes – itemizable when you pay property taxes on real estate
Our Pittsburgh tax planning CPA can help you maximize available deductions and credits. We are familiar with the intricacies of these tools and can ensure you meet all requirements for each deduction or credit. Our team can also assist you with keeping the appropriate records and help you strategically structure your estate in ways that work to lower your tax bill.
A well-designed estate plan will establish who receives your assets once you have passed away. You may choose to leave property to your children, spouse, or other loved ones. However, Pennsylvania charges inheritance taxes when property is transferred to heirs. This means that, without proactive planning, your loved ones will potentially receive a hefty tax bill with their bequeathals.
Pennsylvania inheritance taxes include:
- 4.5% on asset transfers to direct descendants of the decedent
- 12% on asset transfers to siblings of the decedent
- 15% on asset transfers to any other beneficiary
Certain parties are exempt from inheritance taxes. Assets transferred to a decedent’s surviving spouse, parent, or unmarried child under the age of 21 are not subject to inheritance taxes. Jointly owned property will also not be subject to an inheritance tax. If you choose to transfer assets to an organization that is not required to pay taxes – such as a charitable organization or a government entity – they will not have to pay inheritance taxes.
Minimizing the burden of Pennsylvania’s inheritance taxes requires proactive planning. You will not need to worry about any transfers made to your immediate relatives or qualifying institutions, as they are not subject to inheritance taxes in the first place. If you hope to transfer assets to other parties, you can consider strategic and careful use of lifetime gifts or becoming joint owners of the property with the individuals or organizations you wish to benefit. You may also choose to leverage life insurance policies and use the proceeds to pay unavoidable inheritance tax obligations. Additional financial strategies are sometimes available, and we can help you explore all of your options.
ProtectiveOur approach is to maximize your assets and provide long-term financial well-being for the next generation of your family.
SupportiveNo matter how small you think your assets are, we will provide maximization strategies and support you every step of the way.
ProactiveWe encourage clients to start the estate planning process as soon as possible in order to take full advantage of the long term benefits.
If you are not a high-net-worth individual, you probably do not need to worry about estate taxes. A grand majority of people will not be subject to the federal estate tax, and Pennsylvania does not levy its own state-level estate tax.
As of 2021, federal estate taxes will only apply if an estate exceeds $11.7 million in total value. This figure is annually adjusted for inflation.
If your estate is likely to be subject to federal estate taxes, our Pittsburgh tax planning lawyer and CPA can help you take steps to restructure and reposition your assets with the goal of minimizing your tax liability. Powerful estate planning tools, including trusts, can help you shelter, protect, and manage valuable assets. Property placed in certain types of trust will not count toward estate value calculations, potentially allowing you to lawfully avoid federal estate taxes. Our team at the Mt. Jackson Group offers a variety of financial and tax services and can provide you with professional and seasoned counsel.