The top federal income tax rate under current Unites States law is 39.6 percent. When the 3.8 percent “Obamacare” Medicare tax on high-earners is added in, that top rate becomes 42.4 percent. With such high tax rates, it is not surprising that many business owners are looking for ways to keep more of their income for themselves and their families. One of our goals at Garza & Harris is to use every tool available to legally reduce the income tax our clients pay. We recognize the wisdom in the immortal words of the esteemed Judge Learned Hand: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.”
While Garza & Harris’s clients come from a variety of backgrounds, we specialize in reducing the tax burden on high-net worth business owners. We scrutinize a client’s operations to make sure they are taking advantage of every deduction and tax credit available to them under the law. We look for opportunities to avoid the ordinary income tax rate in favor of the lower capital gains tax rate. By utilizing a variety of techniques such as Section 1031 exchanges and tax-free mergers and reorganizations, we avoid triggering taxable events for our clients. In all cases we strive to eliminate or at least defer income tax on any gain our clients realize.
Deferral is a crucial element in income tax planning. Aside from the income tax benefit deferral provides in and of itself (which is one reason IRAs and 401(k) accounts are popular savings vehicles), it can effectively minimize the income tax rate on a client’s lifetime earnings when paired with proper estate planning. Under current law, appreciated property is subject to tax only when the owner sells it. If the owner holds the property until death, his or her heirs take a “stepped-up” basis in the property and the appreciation in the property is never subjected to income tax. By structuring a client’s business interests properly and integrating our income tax planning with an estate plan, we are often able to reduce a client’s tax burden dramatically.