As a soaring economy lifts more Americans into higher tax brackets, many are finding that charitable contributions can offset unexpected new taxes, the Associated Press reports.
The number of U.S. households with a total net worth of more than $1 million has doubled since 1994, Spectrem Group research reports – and new millionaires may be hit with new tax headaches like capital gains and alternative minimum taxes.
And Americans whose adjusted gross incomes tops $150,000 may have to begin making estimated quarterly payments to the Internal Revenue Service for the first time, AP reports.
Accounting firms like J.P. Morgan recommend that newly rich taxpayers minimize pitfalls of new tax brackets by making charitable contributions in 2000 – including stock contributions, which the taxpayer can deduct at fair market value with some income limits, AP says.
Accountants recommend other buffers – such as purchasing municipal bonds and writing off capital losses to offset capital gains — in addition to charitable giving to offset drastic tax increases.