Tax Planning for High - Net Worth Investors

Accredited Investors

An accredited investor is a person with annual income of at least $200,000 or a net worth (not including personal residence) of $1 million. If you meet or exceed this criteria, you can benefit from advanced tax planning. There are potential opportunities for individuals and households who have attained this level of income. 

Sources of Income

There are three main categories that define income and how that income is taxed

Active income

  • The amount earned from employment

Passive income

  • Income generated from investments which include interest, dividends and cash flow from rental properties.

Capital gains

  • Profit received when an asset or property is sold. The difference between what value you own an asset for and the value when that asset is sold is consider a capital gain. 

In the United States we have a marginal tax bracket system. Which simple means our income is taxed based on the level of income. Below is a chart that demonstrates the marginal tax bracket system. This chart only applies to active and passive income.

But what about capital gains tax? The chart below shows how your capital gains are taxed.

There are tax planning strategies available even for the mass affluent earners. Those are the earners at the 22% tax level. However, those earners above the 24% tax bracket have the biggest opportunities due to the investments only available to earners at that level. These are for accredited investors only. 
For those earners who qualify as accredited investors, there are advanced tax strategies that could be available to you. This planning typically takes place in the third and fourth quarter of the calendar year. 
The second half of the year is when your tax advisor should be inviting you in to discuss the potential options available to you. 

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Tax Planning and Real Estate