Individual T/P options?


K

Ken B. Winger

T/P 40 yrs old - MFJ has following 2004 Projections:

Gross Wages: 135k - T/P only

401k Contributions: 8k

Itemized Deductions: 21k

Personal Exemptions: 10

Oldest Child: 17

As part of the $135k, 44k will be in form of bonus to be
paid a year end and wanted to know if there is any way he
can reduce his taxes any more? Perhaps setting up a
scholarship for Child#1?

To me, since he is covered under an retirement plan all he
can do is increase his 401k contribution to 13k and make an
IRA contribution in behalf of his wife for $3k. I am not
aware of any other legal investment option his employer can
use to avoid paying taxes on the bonus?

Any other suggestions?
 
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H

Helen P. OPlanick EA

As part of the $135k, 44k will be in form of bonus to be
paid a year end and wanted to know if there is any way he
can reduce his taxes any more? Perhaps setting up a
scholarship for Child#1?
Gifts to kids are not deductible.
To me, since he is covered under an retirement plan all he
can do is increase his 401k contribution to 13k and make an
IRA contribution in behalf of his wife for $3k. I am not
aware of any other legal investment option his employer can
use to avoid paying taxes on the bonus?
Or just not take the bonus.

Helen, EA in PA
50 miles, 3 days, 1 cause - Multiple Sclerosis Challenge Walk for the Cure
October 1 to October 3, 2004
Donate on-line at www.msandyou.org
 
D

David Woods, EA, ChFC, CLU

Ken B. Winger said:
T/P 40 yrs old - MFJ has following 2004 Projections:

Gross Wages: 135k - T/P only

401k Contributions: 8k

Itemized Deductions: 21k

Personal Exemptions: 10

Oldest Child: 17

As part of the $135k, 44k will be in form of bonus to be
paid a year end and wanted to know if there is any way he
can reduce his taxes any more? Perhaps setting up a
scholarship for Child#1?
Under which tax code provision does one deduct setting up a
scholarship for one's child??
 
G

Gary Goodman

(e-mail address removed)
says...
T/P 40 yrs old - MFJ has following 2004 Projections:

Gross Wages: 135k - T/P only

401k Contributions: 8k

Itemized Deductions: 21k

Personal Exemptions: 10

Oldest Child: 17

As part of the $135k, 44k will be in form of bonus to be
paid a year end and wanted to know if there is any way he
can reduce his taxes any more? Perhaps setting up a
scholarship for Child#1?

To me, since he is covered under an retirement plan all he
can do is increase his 401k contribution to 13k and make an
IRA contribution in behalf of his wife for $3k. I am not
aware of any other legal investment option his employer can
use to avoid paying taxes on the bonus?

Any other suggestions?
Look over his stock/bond/mutual fund holdings. If he won't
have any gains this year, sell losers to generate $3,000 in
loses. If at all possible, it's best to declare losses in
different years than gains.

He can put money into a Sec. 529 plan for Child#1, but that
wouldn't help with current taxes (except in the few states
that give a deduction for contributing to a 529 plan). He
can't fund a "scholarship" if it is designated for anybody,
even somebody else's child, and get a deduction.

If his income is going to be unusually high (for him), then
perhaps he should consider giving money to a planned fund
(it's almost 1 am right now so I can't remember the exact
name). He would get the deduction this year, but can
distribute to charities in the future. Fidelity has one of
these funds.

Gary
 
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K

Ken B. Winger

Gifts to kids are not deductible.
Or just not take the bonus.
Thanks Helen and David,

That's what I thought, there's no tax provision for having
his bonus paid directly to a college or Scholarship! T/P can
be so creative!
 

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