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For Individuals
A Great Tax Savings Plan for Individuals
Are you paying more than $25,000 in taxes each year?
Do
you know there is a tax mitigation strategy that Congress
encourages? Congress has created tax incentives under Section
263(c) to stimulate gas and oil production financed by private
sources. Intangible drilling costs (IDCs) can be 100% deductible
in the first year. IDCs are usually 80% of the cost of the
wells. For example, a $100,000 investment could yield up to
$80,000 in tax deductions. A taxpayer in the 35% tax
bracket could reduce taxes by $28,000. A working interest in
oil or gas wells is not a passive activity therefore deductions can be
offset against income from active stock trades, business income or
salaries - Section 469(c)(3). In addition, the IDCs are
specifically exempted as a tax preference item. Best of all,
income from the investment may begin as soon as six months after the
investment and has a 15% depletion allowance. This is a tax
mitigation investment plan that could produce significant
income and is partially sheltered!!!
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This investment is often used when a 1031 exchange isn’t the best solution for whatever reason. The investment shelters approximately the same amount of capital gains taxes as an exchange would save. The investment must be made, however, by December 31st of the same year as the property sale to save taxes. |
NOTE:
E-mail Chuck DeLao to learn more about these tax savings ideas
For Businesses
A Great Tax Savings Plan
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Do you have income of $200,000 or more in the last couple of years?
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Are you over the age of forty?
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Do you have five employees or less?
Consider a 412i Defined Benefit Plan
that can "super fund" a retirement plan. Instead of paying
estimated taxes to the IRS, you can pay yourself $100,000 to
$300,000.
The Plan must be set up before December 31st!
412(i) Defined Benefit
Pension Plans
What is a 412(i) defined benefit pension plan?
 A
412(i) defined benefit pension plan, referred to in IRS regulations as
an “insurance contract plan” is the only defined benefit plan that is
exempt from the minimum funding requirements of Section 412(i) of
the Internal Revenue Code. This type of plan, therefore,
enjoys certain advantages over the traditional defined benefit plan and
is worth exploring if you are the owner of a small business.
These advantages create a plan that, compared to a traditional defined benefit plan, will produce:
· larger initial deductions;
· greater stability in the contribution level;
· simpler plan administration, and
· a secure promise of future benefits.
What are the advantages of a 412(i) insurance contract plan over a traditional defined benefit plan?
- does not require an enrolled actuary;
- is not subject to the full funding limitation tests of a defined plan;
- is required to use
the contract guarantees as funding assumptions, thus helping shield
them from IRS attack as unreasonable funding assumptions;
- can be designed to
eliminate the potential of excess plan assets that, in a traditional
plan, would be subject to taxes and penalties of 80% or more upon
termination of the plan;
- produces an understandable accrued benefit since it is simply the cash value of the contracts funding the participant’s account;
- creates larger
initial deductions than a traditional plan since the funding
assumptions are required to be much more conservative; and
- provides retirement
benefits that are guaranteed by the insurance company and not just the
financial strength of the particular employer providing the plan.
How much can the initial deductible contribution to a 412(i) Defined Benefit Plan be?
Maximum first year deductions available at selected ages:
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Annuity Only |
Maximum Life Insurance and Annuity |
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Age 40 |
$95,025 |
$117,572 |
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Age 45 |
$133,343 |
$165,831 |
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Age 50 |
$204,464 |
$258,512 |
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Age 55 |
$265,089 |
$349,580
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E-mail Chuck DeLao for a request for pension proposal
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