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About 6 crore <keyword id="19948101" type="General" weightage="100" keywordseo="income-tax-returns" source="keywords">income tax returns</keyword> have been filed for income earned in 2023-24, of which 70 per cent were filed under the new <keyword id="22442211" type="General" weightage="20" keywordseo="simplified-tax-regime" source="keywords">simplified tax regime</keyword> which offers lower rate of tax, Revenue Secretary Sanjay Malhotra said on Tuesday. Addressing the post-budget session of PHD Chamber of Commerce and Industry, Malhotra said there were apprehensions as to whether people would shift to the simplified tax regime. "About 6 crore filed for last year and 70 per cent is under the new income tax regime. The whole move has been towards simplicity with the ultimate purpose being to reduce the <keyword id="20380188" type="General" weightage="20" keywordseo="compliance-burden" source="keywords">compliance burden</keyword>," Malhotra said. For the 2022-23 fiscal, 8.61 crore ITRs were filed. The idea behind comprehensive income tax review as announced in the <keyword id="19936553" type="General" weightage="20" keywordseo="budget" source="keywords">Budget</keyword> is to make the tax law simpler. "We will come up with a draft and then we will seek suggestions," Malhotra said. Currently, India has two <keyword id="20155151" type="General" weightage="20" keywordseo="personal-income-tax" source="keywords">personal income tax</keyword> regimes. In the old income tax regime, the <keyword id="20452955" type="General" weightage="20" keywordseo="tax-rates" source="keywords">tax rates</keyword> are relatively high but taxpayers can claim several exemptions and <keyword id="20385232" type="General" weightage="20" keywordseo="deductions" source="keywords">deductions</keyword>. However, in the <keyword id="19935168" type="General" weightage="20" keywordseo="new-tax-regime" source="keywords">new tax regime</keyword>, tax rates are lower but fewer deductions.

About 6 cr ITRs filed for FY24; 70% under new tax regime

The deadline to file your <keyword id="19948101" type="General" weightage="20" keywordseo="income-tax-returns" source="keywords">income tax returns</keyword> is approaching fast, and Sana is perplexed. All of 23, she's just started earning and working at an MNC, earning Rs 7,00,000 per annum, and can't figure out which <keyword id="20301439" type="General" weightage="20" keywordseo="tax-regime" source="keywords">tax regime</keyword> would work best for her. If you're having the same concerns and can't seem to wrap your head around the <keyword id="19935168" type="General" weightage="20" keywordseo="new-tax-regime" source="keywords">new tax regime</keyword>, here's a ready reckoner for you: When should I choose new tax regime? Think of choosing a tax regime as having to choose a friend in office. The <keyword id="8706677" type="General" weightage="20" keywordseo="old-tax-regime" source="Orion">old tax regime</keyword> is that aged, wise senior who has answers and hacks for everything. Want to get over with a boring project quickly? They will certainly have a trick up their sleeve! On the other hand, the new regime is far more chilled out, lax and is a no-nonsense person who wants nothing to do with long documents and longer meetings. The new regime was introduced in budget 2020 to simplify taxation, and offer lower rate of taxes as compared to the old regime. However, there's a catch. You cannot claim the 70+ exemptions and deductions that help bring down your taxable income and hence, reduce your tax liability. This option is exclusively available under the old tax regime. The main USP of this tax regime? Lower tax rates, and fuss of deductions! Consider this. If your income is within the range of Rs 5,00,000-Rs 12,00,000, and you have no investments, <keyword id="99916" type="General" weightage="20" keywordseo="house-rent-allowance" source="Orion">house rent allowance</keyword> (<keyword id="19944588" type="General" weightage="20" keywordseo="hra" source="keywords">HRA</keyword>), health/life insurance premiums or other such deductions to claim, the new tax regime would obviously make more sense to you, given the significant difference in tax liabilities (just 5% under new regime, and a whopping 20% in old regime for those in the Rs 5-6 lakh bracket!) <div type="image" title="Tax rates under old and new regime" msid="111685908" hostid="261"></div> So, if you're someone who hates complex tax calculations, wants minimal tax deductions, the new regime might just be for you! But remember, there are two conditions under which this new regime will be automatically chosen for calculating your taxes: <ul><li>If you keep procrastinating and don't file your <keyword id="6374875" type="General" weightage="20" keywordseo="ITR" source="Orion">ITR</keyword> till July 31, 2024</li><li>If you do not specifically opt for the old tax regime on your employer's HR portal</li></ul>Also, if you earn less than Rs 3,00,000 per annum, you are completely exempted from paying any tax at all. In the old regime, this basic limit is slightly lower at Rs 2,50,000. Also read: <a href="https://www.businessinsider.in/personal-finance/income-tax/all-you-need-to-know-about-the-new-tax-regime/articleshow/111578840.cms" data-type="tilCustomLink">All you need to know about the new tax regime</a> So, what do I get under this regime? Thanks to a rebate under Section 87A, if you earn up to Rs 7 lakh per annum, your tax liability (and Sana's as well) will effectively be zero. This is limited to Rs 5 lakh under the old regime. While a <keyword id="20429578" type="General" weightage="20" keywordseo="standard-deduction" source="keywords">standard deduction</keyword> of Rs 50,000 is available under both of them (so you can directly deduct Rs 50,000 from your total income before even beginning to calculate your tax liability), there are a lot more deductions and exemptions that this regime DOES NOT allow you to avail: <ul><li>Leave Travel Allowance (LTA)</li><li>House Rent Allowance (HRA) (Comes in handy if you're paying hefty rents in metros)</li><li>Interest on housing loan (on self-occupied property or vacant property)</li><li>Own contribution to NPS (If there's any)</li><li>Interest earned on savings bank A/Cs </li><li>Investments made in ELSS, PPF</li><li>Premiums paid towards life, health insurance policies</li></ul>As for the deductions that are allowed, that makes for a pretty small list: <ul><li>Transport allowances (only if you are specially abled)</li><li>Gifts of up to Rs 50,000</li><li>Employer’s contribution to your NPS account</li><li>Interest paid on home loan only on let-out property</li></ul>But that's the trade-off. You get to pay taxes at low rates, yes, but you also don't get to claim a whole lot other deductions. Notes CA Nitesh Buddhadev, "Which regime is beneficial for you depends upon the allowances and deduction available to you during a relevant financial year. So, if your total income from salary is Rs 10.5 lakh and if the aggregate of any of the deductions / allowances you can claim is less than Rs. 3.15 lakh, you should opt for the new tax regime. If you have not invested in multiple tax-savings scheme, the new regime will work better. So, don't make this decision in any haste. You can choose your tax regime only once in a financial year. And if your income from business or other professions, be even more careful, because this will then become a once in a lifetime choice for you (quite literally!). So, take a good hard look at your finances, and then decide what works best for you!

Confused about the new tax regime? Here's when you should opt for it

July's here, and as we inch closer to the budget, which is set to be presented around the latter half of July, there is much talk about how it will affect our pockets. Reports suggest the government is considering raising the <keyword id="20429578" type="General" weightage="20" keywordseo="standard-deduction" source="keywords">standard deduction</keyword> threshold from existing Rs 50,000 to Rs 1,00,000, amidst other things. The most common wish for a salaried employee is to reduce the income tax rates across all slabs, but at the moment, this seems unlikely. That aside, we decode the common man's wish list and what they look forward to in terms of <keyword id="22225988" type="General" weightage="20" keywordseo="income-taxes" source="keywords">income taxes</keyword> as the Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> drafts the budget. <h2>Wish 1: Raise the standard deduction to Rs 1 lakh</h2>A standard deduction is a fixed amount that you can deduct from your taxable income right away, to reduce your overall tax liability. You do not need to furnish any proofs for this amount. Currently, this stands at Rs 50,000, under both old and new tax regimes. Raising this threshold to Rs 1,00,000 will mean more disposable income in your hands. And as per the policy experts, this is the most likely change that we can expect under the new budget. <h2>Wish 2: Increase the <keyword id="20228341" type="General" weightage="20" keywordseo="basic-exemption-limit" source="keywords">basic exemption limit</keyword> in new tax regime</h2>As per EY's pre-budget expectation report, an increase in the basic exemption limit from the present Rs 3,00,000 to Rs 5,00,000 would immensely benefit the common man. Earlier, this limit was set at Rs 2,50,000. Note that unless you specifically opt for the old regime, the new tax regime is considered as your default choice starting 2023. If your annual income is equal to, or falls below this basic exemption limit, you do not have to pay any income tax. <h2>Wish 3: Increase tax-free limit of LTCG gains </h2>At present, if you sell any equity mutual fund unit or share after more than 12 months of holding it, you'll have to pay a 10% long-term capital gains (LTCG) tax. However, within one financial year, long-term capital gains below Rs 1,00,000 are tax-exempt. As EY's report notes, raising this extant tax-free limit to Rs 2 lakh would be beneficial, especially in boosting long-term investing sentiment in the country. But will this come true? Only Nirmala Sitharaman knows! <h2>Wish 4: Consider some tier-2 cities as metros for HRA exemption </h2>Residents of Gurugram, Noida, Bengaluru, listen up! HRA, or House rent allowance is a crucial component of our salary, and hence, our tax planning as well. You can get HRA exemption on the lowest amount amidst these 3: 1. Actual HRA received 2. 50% of salary for metro cities (Delhi, Mumbai, Kolkata, Chennai) 3. 40% of salary for non-metro cities 4. Rent paid- 10% of salary But its no secret that residents of nearby cities like Noida, Gurugram, Faridabad, or rapidly developing urban hubs like Pune, Ahmedabad, Ghaziabad, Hyderabad, Bengaluru, Thane bear the brunt of sky-high residential rents that takes a huge toll on their monthly income. Yet, they cannot claim 50% of their salary for HRA exemption. Since these cities has been classified as a non-metro, residents can claim a maximum of 40% of their salary as exemption. In case rent exceeds Rs 1,00,000 annually, you are also required to furnish the PAN details of landlord, along with a formal rental agreement. Consider this. You live in Delhi, and have an annual income of Rs 10,00,000. For HRA purposes, you can claim exemption of up to Rs 5,00,000, since Delhi is considered a metro. But, if you live in Ghaziabad, or Noida, the limit available to you sharply falls down to Rs 4,00,000. This budget, as reports note, considering these cities as metros for tax purposes would provide some relief to the common man's pocket. Per a recent report by ANAROCK research, the top 7 cities in the country (Mumbai metropolitan region, Hyderabad, Bengaluru, Pune, Delhi NCR, Chennai and Kolkata) saw an average price rise between 13-39% on a yearly basis. In fact, it was Hyderabad recorded the highest yearly price rise in residential property last quarter, jumping by as much as 39%. <h2>Wish 5 : Enhance exemption limits under the old regime</h2>The list is endless, but so are our wishes! Experts are also suggesting an enhancement in the existing limit for deduction towards interest on housing loan for self-occupied house. From its present limit of Rs 2 lakh, it should be taken to Rs 3 lakh. Also, the Rs 2-lakh cap on set off of house property loss against other heads in the same year should be done away with. For senior citizens, there should also be greater clarity on how funds received from <keyword id="19919089" type="General" weightage="20" keywordseo="nps" source="keywords">NPS</keyword> (National Pension System) via the systematic lumpsum withdrawal plan should be taxed. Well, we can only hope some, if not all of these wishes come true when finance minister presents the union budget in the parliament this month.

Budget 2024: Increase standard deduction, exemptions and more, an aam aadmi's wishlist

<ul class="summary-list"><li>Kamala Harris is aiming for 25 million new business applications in her first term.</li><li>To get there, she's proposing an increased tax deduction and reduced red tape.</li></ul>Vice President Kamala Harris wants you to start a small business.Harris is set to roll out another economic policy, focused on a new goal: boosting small business creation. Harris's goal — which she'll announce on Wednesday — is 25 million new business applications in her first term if elected.That would outpace the <a target="_blank" href="https://www.sba.gov/article/2024/04/11/new-small-business-applications-soar-over-17-million-under-biden-harris-administration">over 18 million new business applications</a> filed so far during the Biden-Harris administration, which comes amid a post-2020 <a target="_blank" href="https://www.uschamber.com/small-business/new-business-applications-a-state-by-state-view">business application boom</a>. Harris aims to hack away at some of the red tape and startup costs new businesses face when they're setting up shop.According to a Harris campaign official, Harris wants to bolster the tax deduction that small businesses can claim for initial startup costs. Some small business owners have to turn to <a target="_blank" href="https://www.businessinsider.com/alternative-business-funding-options-small-companies-2023-9">creative funding measures</a> to get their businesses off the ground, which can come with their own risks.Harris's proposal would increase that startup deduction tenfold, upping it from $5,000 to $50,000; businesses would also be able to defer claiming it until they turn a profit — which is when they'd also likely encounter a larger tax burden.The other aspect of Harris's plan hinges on easing the logistical burden on new entrepreneurs. It's no secret that many small businesses must wade through <a target="_blank" href="https://www.businessinsider.com/jpmorgan-jamie-dimon-says-bureaucracy-is-crippling-us-hindering-progress-2021-4">administrative red tape</a> to finally <a target="_blank" href="https://www.businessinsider.com/something-about-her-sandwich-shop-opening-day-vanderpump-rules-2024-5">get to their opening days</a>.Harris's proposals include incentives for local governments to reduce their own red tape, creating a standard deduction for small businesses to ease the time spent on taxes, and chipping away at barriers in obtaining occupational licenses that can inhibit businesses or workers from crossing state lines.Harris also wants to pour cash into small businesses: She wants to guarantee that a third of federal contract dollars will go to smaller businesses and set up a fund to help community banks cover the cost of interest for small businesses.Harris previously called for a <a target="_blank" href="https://www.businessinsider.com/child-tax-credit-new-parents-cut-taxes-harris-economic-policy-2024-8">restoration of the expanded child tax credit</a> — bringing it back up to $3,600 — and giving middle and lower-income parents a $6,000 credit in their child's first year of life.How far a hypothetical future President Harris could get with major economic proposals will depend on the makeup of Congress. Attempts by President Biden to restore the child tax credit were stymied in the Senate; a gridlocked legislature might mean even more roadblocks for potential President Harris.

New business owners could get a $50,000 tax deduction under Kamala Harris's plan

<ul class="summary-list"><li>The 2024 election will affect taxes, with key policy changes expected in 2025 no matter who wins.</li><li>Trump's plans could mean tax hikes for lower earners; Harris' proposals would target higher earners.</li></ul>Election Day is fast approaching, and no matter who wins, you'll probably see changes to your tax bill in 2025.In the fourth installment of BI's five-part series in the final stretch before the election, Business Insider is looking at the ways each candidate's policies could affect how much you pay in taxes. (Read <a target="_blank" rel="" class="" href="https://www.businessinsider.com/market-impact-presidential-election-scenarios-trump-harris-stocks-bonds-crypto-2024-10">part one</a> about investments, <a target="_blank" rel="" class="" href="https://www.businessinsider.com/cost-expensive-goods-price-impact-presidential-election-scenarios-trump-harris-2024-10">part two</a> about costs, and <a target="_blank" class="" href="https://www.businessinsider.com/housing-affordability-supply-impact-presidential-election-scenarios-homebuyers-harris-trump-2024-10">part three</a> about housing.)Each of the three sections below represents a key segment of the taxpaying population: low- and middle-income earners, high-income earners, and businesses. BI will unpack how a Trump or Harris presidency is expected to affect all three groups.<h2 id="340d6951-a382-4d10-927e-fbfb8a85b7a9">Low- and middle-income earners</h2>Under Trump's proposal, lower- and middle-income Americans could see some tax reductions, especially if they're trying to pay off a car or have a job that relies primarily on tips. Trump has proposed extending his slew of tax cuts from the Tax Cuts and Jobs Act of 2017 — also known as the "Trump tax cut." He's also seeking to eliminate taxes on <a target="_blank" class="" href="https://www.businessinsider.com/tax-tips-overtime-trump-proposals-income-money-election-2024-10">tips, overtime</a>, and <a target="_blank" class="" href="https://www.businessinsider.com/trumps-tax-plan-social-security-retirement-medicare-2024-8">Social Security benefits</a>, as well as making <a target="_blank" class="" href="https://www.businessinsider.com/trump-speech-detroit-new-car-loan-interest-tax-proposal-2024-10">car interest payments tax deductible</a>.Based on an analysis from the left-leaning Institute on Taxation and Economic Policy, keeping the income-tax cuts from the TCJA alone could mean a tax reduction of just over $1,000 for the middle 20% of Americans.But another part of Trump's tax policy — his plan to levy universal tariffs on all US imports — could end up undercutting this positive impact. Economic <a target="_blank" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4834397">analyses</a> have found that those tariffs could offset the tax benefits and then some for lower-earning Americans.Factoring in the cost of tariffs, Trump's tax package could result in higher tax bills for everyone but the top 5%, the Institute on Taxation and Economic Policy <a target="_blank" href="https://www.businessinsider.com/trump-tax-plan-tarriffs-benefits-top-earners-study-2024-10">found.</a>"A lot of those tariffs do end up harming lower-income families and taxpayers who buy goods from abroad," Garrett Watson, a senior policy analyst at the right-leaning Tax Foundation, said.Harris has <a target="_blank" class="" href="https://www.businessinsider.com/jd-vance-expanded-child-tax-credit-proposal-pro-family-2024-8">proposed</a> an expanded earned-income tax credit aimed at lower-income earners, and she wants to restore and expand upon a more generous child tax credit, similar to the one implemented under Biden's pandemic-relief bill in 2021. The <a target="_blank" href="https://taxpolicycenter.org/taxvox/key-harris-tax-credits-would-largely-benefit-low-and-middle-income-households">Tax Policy Center estimates</a> that Harris' proposals could bring down household taxes by an average of $750 — with the lowest-income earners seeing their after-tax incomes grow the most.Harris' and Trump's proposals share some key similarities: Both have proposed some version of eliminating taxes on tips. While Harris hasn't outlined specifically what she'd preserve from the TCJA, she's maintained Biden's promise not to raise taxes on those making below $400,000. The Trump campaign has also shown <a target="_blank" class="" href="https://www.businessinsider.com/jd-vance-expanded-child-tax-credit-proposal-pro-family-2024-8">interest in bolstering the child tax credit</a>.<h2 id="cbdc640e-2340-4bd9-af1d-48c2bab5e227">High-income earners</h2>If Trump makes all the TCJA's income-tax provisions permanent, middle-income Americans would get a tax break of about $1,000, while the top 0.1% of earners would see a cut of nearly $280,000, a <a target="_blank" href="https://taxpolicycenter.org/taxvox/those-making-450000-and-would-get-nearly-half-benefit-extending-tcja">Tax Policy Center analysis</a> found.Another boon for wealthy Americans would be an extension of the break in estate taxes. The TCJA <a target="_blank" class="" href="https://www.businessinsider.com/bernie-sanders-is-targeting-wealthy-with-two-new-tax-measures-2021-3">doubled</a> the amount of inherited wealth that could be considered tax-exempt, from around $5.5 million in 2017 to around <a target="_blank" class="" href="https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax">$11.2 million in 2018</a>.Trump has <a target="_blank" href="https://truthsocial.com/@realDonaldTrump/posts/113154156175795473">floated</a> lifting the $10,000 cap on the State and Local Tax deduction, known as SALT, from his 2017 tax bill. SALT mostly impacts affluent taxpayers in blue states with high local taxes, and a repeal of the cap would restore a tax break mostly enjoyed by higher earners in places like California, New Jersey, and New York, said Benjamin Page, a senior fellow at the Urban-Brookings Tax Policy Center.Harris' tax proposals target higher earners to help offset costs — if the TCJA were to expire for taxpayers making over $400,000, the top marginal rate would increase from <a target="_blank" href="https://www.brookings.edu/articles/which-provisions-of-the-tax-cuts-and-jobs-act-expire-in-2025/#:~:text=For%20example%2C%20the%20TCJA%20cut,levels%20if%20the%20TCJA%20expires.">37% to 39.6%</a>. She also supports two measures that have gained traction during the Biden administration: targeting ultrawealthy investors' capital gains and imposing a minimum income tax on billionaires."Unlike the Trump campaign, the other shoe for the Harris-Walz campaign comes on the high end," Ernie Tedeschi, the director of economics at the Yale Budget Lab and the former chief economist at the White House Council of Economic Advisers, said.Harris has proposed bumping the tax on <a target="_blank" href="https://www.businessinsider.com/what-is-capital-gains-tax-2018-8">capital gains</a> for Americans making $1 million or more from 20% to 28%. That would mean a higher tax rate on the money wealthy Americans make when they sell off assets like real estate or stocks — a <a target="_blank" href="https://www.businessinsider.com/capital-gains-taxes-hike-rate-over-1-million-brian-deese-2021-4">key source of income</a> for more affluent taxpayers.Harris also supports a minimum income tax for billionaires, a proposal <a target="_blank" href="https://www.businessinsider.com/biden-billionaire-income-tax-could-look-like-withholding-on-paychecks-2022-3https://www.businessinsider.com/biden-billionaire-income-tax-could-look-like-withholding-on-paychecks-2022-3">Biden has touted</a>. She hasn't released specifics on what that would look like.<h2 id="a4c38432-f9ca-4a2d-ab93-24e1a7b76af9">Big- and small-business owners</h2>Harris wants to bump up the corporate tax rate from <a target="_blank" href="https://kamalaharris.com/wp-content/uploads/2024/09/Policy-Book-Economic-Opportunity.pdf">21% to 28%</a>, while Trump has proposed lowering it from <a target="_blank" href="https://www.crfb.org/blogs/donald-trumps-proposal-lower-corporate-tax-rate-15">21% to 15%</a> for firms that make their products in the US.Harris has <a target="_blank" href="https://www.businessinsider.com/state-taxes-deductions-salt-relief-house-republicans-bill-2023-7">proposed</a> some specific breaks for small businesses. Her key proposals include beefing up the startup deduction for new businesses from $5,000 to $50,000, creating a standard deduction for small businesses, and incentivizing local governments to ease up red tape, such as <a target="_blank" class="" href="https://kamalaharris.com/a-new-way-forward/#:~:text=Vice%20President%20Harris%20and%20Governor%20Walz%20will%20work%20to%20reduce,and%20speed%20implementation%20of%20multi%20state%20or%20universal%20licensing%20recognition.">doing away</a> with barriers to licensing and making it easier to recognize credentials across states."Many startups may be able to deduct the cost of those startup expenses more quickly and more fully, which could encourage, at least on that margin, a little bit more startup activity," Watson said.Meanwhile, Tedeschi said Trump's tariffs could weigh on small businesses. Importers might have to choose between raising prices or absorbing the cost through lower margins.But Tedeschi said both candidates' proposals to eliminate taxes on tips could ultimately be a boon for small businesses."The employer's going to be able to pay a little bit less for those jobs, given the demand for them," he said. "The tipped workers are probably going to end up fine because again, their tips are tax-free."Trump's proposal to <a target="_blank" href="https://www.businessinsider.com/tax-tips-overtime-trump-proposals-income-money-election-2024-10">eliminate taxes on overtime pay</a> could also benefit small businesses by allowing them to reconfigure how they schedule and pay workers.One question mark for both campaigns is a TCJA provision that allows some business owners to deduct their business income from their taxable income. Democrats in Congress are hoping to preserve the deduction for business owners making under $400,000 but change it for those above that threshold, a Senate Finance Committee aide told BI.

What a Trump or Harris presidency would mean for your tax bill

<ul class="summary-list"><li>High-net-worth investors use many loopholes to reduce their taxes.</li><li>Among them are exchange funds, collars, 1031s, and hedging and borrowing against assets.</li></ul>In simple terms, there are only three places your money can go: to you and your family, to charitable organizations, and to the IRS. That's the pep talk Nayan Lapsiwala, a director of wealth management and partner at Aspiriant, gives his ultra-high-net-worth clients.The second part of his pep talk is to avoid letting tax avoidance undermine your financial future. It could be a bad idea to keep a stock solely to skip out on realizing capital gains."What if that stock falls 50% or more?" Lapsiwala said. "You are trying to save money on taxes, but your entire financial future can get wiped out with the market."This is why <a target="_blank" class="" href="https://www.businessinsider.com/tax-strategies-irs-rules-that-can-improve-your-financial-situation-2024-5">tax loopholes</a> and <a target="_blank" class="" href="https://www.businessinsider.com/how-to-defer-real-estate-capital-gains-tax-1031-exchange-2024-3">deferral strategies exist</a>, and why the wealthy seek out top advisors to help them navigate the complicated and intricate tax code. The right advice can buy time, reduce tax burdens, or even avoid them altogether without breaking any laws.<h2 id="e7689c3d-b101-4cb5-aaa5-8e6baca28255">8 loopholes</h2>Most investors know and have access to an <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-an-etf#:~:text=An%20exchange%2Dtraded%20fund%20(ETF,liquid%20as%20some%20mutual%20funds.">exchange-traded fund</a> (ETF). But what about an exchange fund?For investors who have reaped high gains from a stock and want to shave some off to reduce concentration risk, Lapsiwala says choosing to pool their assets in an exchange or swap fund with other investors is the way to go. A manager then oversees this fund. Consider it a 'you share your stocks, and I'll share mine'-type scenario. It gives participating investors diversification without triggering a tax event. The catch is that the shares must be held in the fund for seven years to reap the benefits and defer the tax."The manager's responsibility is to reduce capital gain taxes for everyone because now as you have a pool of assets, there might be some stocks that will go down in value, some might go up," Lapsiwala said. "So, a tax-loss-harvesting type of trading will take place and then you are reducing your capital gains taxes."Another way to lock in profits on securities is by creating collars, which means buying a <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/option-chain#:~:text=An%20option%20is%20a%20contract,its%20own%20type%20of%20security.">put option and selling a call option</a> against the underlying asset. It hedges the share price because the put creates a floor, allowing the buyer to keep the stock but offload it if it falls below the agreed-upon price, which is the strike. But buying that put will cost a premium. Therefore, calls are sold to offset the cost, giving another buyer the right to purchase the stock if it rises. The downside is that it caps any upside potential above the strike."There are executives we work with, for whatever restriction, they cannot sell, or they have huge capital gains and they don't want to take a big tax hit," Lapsiwala said. This strategy helps them plan the timing of when they want to realize the gains."For those who need liquidity, once the stock is hedged, they can borrow up to 50% against its value on margin, Lapsiwala noted. This strategy could have a double tax benefit: One, the investor isn't realizing a capital gain. Two, if the borrowed amount is used for another investment and there is investment income, the cost of borrowing is treated as investment interest. It can be used to reduce the overall taxable income.Some investors will borrow against their stocks without hedging. This is common for short-term liquidity needs, like bridge financing to buy a property while waiting to sell another, Lapsiwala noted. The risk here is if the stock drops in value in the interim, you get a <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/margin-call#:~:text=A%20margin%20call%20occurs%20when%20the%20value%20of%20the%20equity,off%20some%20of%20the%20investments.">margin call</a> and must come up with the capital to cover it.As for investors who have philanthropic goals, charitable giving is tax deductible. Still, instead of giving cash that's already taxed, some of Lapsiwala's wealthy clients give their appreciated securities to a 501(c) charitable organization. This grants them a tax deduction while skipping out on capital gains tax.Another way of giving to charity is by donating appreciated assets to a donor-advised fund (DAF). In turn, the investor get a tax deduction in the year it was gifted, but they don't have to give the full amount to the charitable organization in that calendar year."This is a strategy when you have high taxable income, and you want to reduce your taxes but aren't sure that you want to give charitable grants of a high amount in a year," Lapsiwala said. "So what we typically do is, let's say clients are giving $100,000 a year, we will say, 'let's fund that by a million dollars' and they can get that million dollar deduction now, but over the next 10 years, give $100,000 annually from that account."Clients who want to give to charity while continuing to benefit from gains on their principal can opt for a charitable remainder trust (CRT). It allows them to transfer cash, property, or assets to an irrevocable trust that pays an income in the form of an annuity or a percent of the trust's assets for a term or until their death, upon which it goes to the selected charities.John Pantekidis, managing partner at TwinFocus, says CRTs are a win-win for the charity and donor. The latter gets a tax deduction up front and an annuity while helping a charity.Pantekidis, whose average client is worth close to $200 million, says this setup is suggested for clients with highly appreciated assets who want an income from it but are also charitably inclined.But perhaps the tax avoidance strategy that has been an absolute home run for high-net-worth clients, according to Pantekidis, is investing in qualified opportunity zones. These are economically distressed areas that require long-term investments in real estate and businesses.If you have a million dollars of capital gains and if you invest it in a qualified opportunity zone, you get to defer that through 2026, Pantekidis noted. Any appreciation on that investment escapes tax permanently; that's an avoidance, he said. Furthermore, an investor can depreciate the property for further tax deductions without depreciation recapture."So not only do you avoid tax on the gain, to the extent you get depreciation you can avoid tax on the initial gain. It's become an absolute home run for ultra-high-net-worth clients who have capital gains. Even some of our hedge fund managers who get compensation through carried interests of capital gains can defer those capital gains and even avoid them."However, the investment must be held for five to seven years to defer a portion of those gains and at least 10 years for the new gains to be fully tax-free.Finally, those with an appreciated property who can identify a similar property to swap it with can use 1031 Exchanges. It allows the client to defer the capital gains. If they die with the property, they can get a step-up in basis which permanently removes any tax originally deferred by the exchange, Pantekidis said.

8 of the savviest loopholes wealthy investors use to reduce or avoid capital gains tax

At a campaign rally for former President Donald Trump in New York on Sunday, <a href="https://www.businessinsider.com/elon-musk" target="_blank">Elon Musk</a> said he'd save the United States $2 trillion through a <keyword id="23593857" type="General" weightage="20" keywordseo="Department-of-Government-Efficiency" source="keywords">department of government efficiency</keyword>. Howard Lutnick, the CEO of the financial-services company <keyword id="20371653" type="General" weightage="20" keywordseo="Cantor-Fitzgerald" source="keywords" meta.keywordsubtype="org" meta.entityname="Cantor Fitzgerald" meta.hostid="261" meta.entityid="Cantor Fitzgerald">Cantor Fitzgerald</keyword>, introduced Musk at the event. As he took the stage, Lutnick asked the Tesla and SpaceX CEO, "How much do you think we can rip out of this wasted $6.5 trillion <keyword id="23762349" type="General" weightage="20" keywordseo="Harris-Biden-budget" source="keywords">Harris-Biden budget</keyword>?" "I think we can do at least $2 trillion," Musk replied. "I mean, at the end of the day, you're being taxed. You're being taxed. All government spending is taxation. So whether it's direct taxation or all government spending, it either becomes inflation or it's direct taxation." Musk added: "Your money is being wasted, and the <a href="https://www.businessinsider.com/trump-adopts-elon-musk-plan-cut-government-spending-efficiency-reform-2024-9" target="_blank">Department of Government Efficiency</a> is going to fix that. We're going to get the government off your back and out of your pocketbook." Trump has previously said he'd put Musk in charge of a department of government efficiency — or "DOGE," after the cryptocurrency — if he wins the election. Musk did not elaborate on policy changes or spending cuts he would implement if he were to join a second Trump administration. Musk and representatives for the Trump campaign did not immediately respond to a request for comment. The federal government's spending in the 2024 fiscal year was $6.75 trillion. Musk's suggested cuts would represent nearly a third of that sum. It's unclear where Musk's suggested cuts would come from. Both Trump and Vice President Kamala Harris have proposed various tax changes as part of their campaigns. Those proposed by Trump include ending taxes on tips and overtime, reducing the corporate tax rate, hiking tariffs on imports, and ending taxes on Social Security benefits. Harris has proposed tax credits for new parents and homeowners as well as an expansion to the Small Business Tax Deduction. When it comes to Social Security, the Committee for a Responsible Federal Budget has said that neither Trump nor Harris has proposed a plan that would fix Social Security's finances but that Trump's proposals would "dramatically worsen Social Security's finances." Trump's campaign <a href="https://www.businessinsider.com/trump-presidency-would-make-things-worse-for-social-security-nonprofit-2024-10" target="_blank">has disputed</a> the findings of the CRFB's report. The Wall Street Journal organized a <a href="https://www.wsj.com/politics/elections/economists-say-inflation-deficits-will-be-higher-under-trump-than-harris-0365588e" target="_blank">survey</a> of 50 economists from October 4 to October 8 and found that 65% said the deficit would get worse with the policies Trump has proposed. <h2 style="color: rgb(34, 34, 34); font-family: Arial, Helvetica, sans-serif; background-color: rgb(255, 255, 255);">Musk's growing support for Trump</h2>Musk, the world's richest person, has become one of Trump's staunchest and most vocal backers in this election cycle. Musk <a href="https://www.businessinsider.com/elon-musk-donald-trump-feud-relationship-timeline-2022-7" target="_blank">endorsed Trump in July</a> after the former president survived an assassination attempt during a rally in Pennsylvania. The two have discussed Musk holding a seat in Trump's Cabinet if the former president were to be reelected. During a livestream on X in August, Musk said he would be "happy to help out" with a government-efficiency commission. In a September speech, Trump again mentioned the commission, saying he'd want Musk to oversee the project. Musk's financial power is translating into real moves on the campaign trail. As of Friday, Musk has spent just under $119 million on his pro-Trump political action committee, America PAC. He has been hitting the road in the key swing state of Pennsylvania and holding his own rallies in support of Trump. Musk has also said he's launching a daily $1 million giveaway to a swing-state voter who signs his petition affirming support for free speech and the right to bear arms. Some election-law experts previously told BI the giveaway plan might be illegal. With the election just over a week away, the race between Harris and Trump remains on a razor's edge. A national poll by <a href="https://www.nytimes.com/2024/10/25/us/politics/poll-harris-trump-times-siena.html" target="_blank">The New York Times and Siena College</a> released Friday found Trump and Harris to be neck and neck at 48% for the popular vote. October 28, 2024, 3:08 a.m. ET: This story has been updated with context on Musk's comments about the prospect of taking on a government role, details about Musk's political spending in the 2024 election cycle, and details on Trump's and Harris' respective economic proposals.

Elon Musk took the stage at a Trump rally to talk about taxes and the 'Department of Government Efficiency'

<ul class="summary-list"><li>Trump announced a new tax proposal to appeal to car buyers and the auto industry.</li><li>It took him a while to get to that. Along the way, he denigrated Detroit, where he was speaking.</li></ul>On Thursday, former President Donald Trump traveled to Michigan to announce a new tax cut proposal designed to appeal to both car buyers and the auto industry.Trump told the Detroit Economic Club that under the new proposal, interest on car loans would be fully tax-deductible, as is the case with <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/mortgages/mortgage-interest-deduction">home mortgage loans</a>.The proposal, which would require Congress's approval and is part of a broader <a target="_blank" href="https://www.businessinsider.com/trump-tax-plan-tarriffs-benefits-top-earners-study-2024-10">array of tax cuts</a> that the former president would seek next year, aims to make it easier to buy a car and stimulate the auto manufacturing industry."It's like the paper clip," Trump mused, claiming he'd spoken to a person who worked in the auto industry who was dumbstruck by the proposal. "Somebody comes up with the paper clip, and everybody asks 'Why the hell didn't I think of that, right?'"By that point, Trump was roughly two hours into his address.Prior to that, the former president offered various musings on topics ranging from the ongoing presidential election, to his occasional <a target="_blank" href="https://www.businessinsider.com/trump-suffers-teleprompter-trauma-at-a-rally-in-ohio-2024-3">trouble with faulty teleprompter</a> systems, to the state of the economy."The word 'grocery,' yeah, it's a sort of simple word, but it sort of means like everything you eat," Trump said at one point. "The stomach is speaking, it always does." At one point, Trump casually noted that he had another grandchild on the way: His youngest daughter, Tiffany, is pregnant."She's gonna have a baby. So that's nice," Trump said.Trump also said that "companies outside of our world, big companies, powerful companies" had been allowed to "come in and raid and rape our country.""Oooh, he used the word 'rape'," Trump said mockingly. "That's right I used the word 'rape.' They raped our country." And when discussing the impact of a potential victory by Vice President Kamala Harris, Trump denigrated the city of Detroit, where he was speaking."The whole country's going to be like — you want to know the truth? It'll be like Detroit," Trump said. "Our whole country will end up being like Detroit if she's your president."

In rambling, hours-long speech, Trump introduces new car loan tax proposal

<ul class="summary-list"><li>Using a 401(k) can boost investment portfolios by 23%, per Charles Schwab study.</li><li>The study compared 401(k) and taxable accounts over 20 years with an 8% annual return.</li></ul>Nothing is less exciting than thinking about <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/taxes">taxes</a>, especially when the bill is coming due.And once you cross into the first quarter of the year, little can be done to reduce your tax liability, especially if you're a W2 employee.That's why thinking about deferral strategies is a great way to reduce how much you pay in taxes and increase your net worth in the long term. But to maximize your outcome, you have to start with a <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-401k">401(k)</a> or a <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-ira">Traditional IRA</a>, according to a recent simulated study by Charles Schwab. The study showed how a 401(k) could increase an investment portfolio's value by 23%.The study, which was backtested over 20 years, compared two investors, one who used a taxable brokerage account versus one who used a 401(k). At an 8% annual return, it found that the latter finished with a value of $177,116 compared to the taxable account at $144,547. Based on this scenario, it assumed that someone allocating funds after tax in a 24% bracket would have a principal investment of $38,000 compared to $50,000. It also assumed taxable events on a turnover rate every five years and on 2% qualified income dividends and 6% long-term capital gains.<div type="image" title="Chart showing increased portfolio value with tax-deferred account." height="1064" width="1846" msid="114955475" hostid="261" sizebytes="34694"></div>In a scenario where an investor uses a taxable account but doesn't turnover or realize gains every five years, meaning taxable events are only placed on the 2% dividends, the outcome would lead to an ending value of $152,392.One caveat is that <a target="_blank" class="" href="https://www.businessinsider.com/tax-loopholes-to-reduce-or-avoid-capital-gains-taxes-2024-10">tax-deferred accounts</a> don't take into account every phase of where taxation can occur along the investment process, says Rob Williams, managing director of financial planning at Charles Schwab. The first point is when money is earned and before it's invested. The second is when income and dividend payments are earned along the way. The third point is once gains are realized. The first two taxation points are covered. The last phase isn't. For this process, other accounts, such as Roth IRAs for after-tax contributions allow gains to grow tax-free.Roth IRAs could come in handy in retirement during years when you have a higher withdrawal rate and, in turn, fund yourself in a higher tax bracket.<h2 id="bd273b03-5ffe-4b6d-8acc-d2373d85fc37">Other tax tips</h2>Another option people don't think about as much is a <a target="_blank" class="" href="https://www.businessinsider.com/how-to-use-health-savings-account-retirement-tool-investing-wealth-2024-10">health savings account</a>, which is unique, Williams noted. You have to qualify for those with an employer that provides it through a health insurance policy with a high deductible plan. But they are a nice additional tool that investors can use to contribute from their paycheck, he added.It's contributed pre-tax. And if the money isn't used for healthcare costs, it can be saved and invested in that health savings account and grow tax-free. It's tax deferral and tax avoidance, he noted."For a health savings account, that's powerful," Williams said. "We call that a triple tax exemption. You get no taxes when you put the money in and no taxes on any growth or capital gains in the fund. And then when you take it out, you don't have any taxes as well."Taxable brokerage or investment accounts are still useful because they allow you to withdraw money before retirement. This is especially great in the event you need to make a big purchase. But when using these accounts, investors should consider the assets they're buying. For example, exchange-traded funds have less tax drag than mutual funds that have higher turnover and, in turn, more taxable events, Williams noted."Any investment or mutual fund that generates a fair amount of investment income, whether it's interest or dividends, do not tend to be very tax efficient," Williams said.This also means considering how funds distribute gains, such as whether they are qualified or ordinary dividends. The latter is taxed at an investor's tax rate and depending on what margin that's in, it may not be as advantageous as a qualified dividend.

How tax-deferred investing can increase a portfolio's value by 23% and the account that provides a triple benefit

The government has relaxed provisions of <keyword id="19948097" type="General" weightage="20" keywordseo="tds" source="keywords">TDS</keyword>/<keyword id="19950203" type="General" weightage="20" keywordseo="tcs" source="keywords">TCS</keyword> in the event of the death of the deductee/collectee before the linkage of PAN and <keyword id="19898107" type="General" weightage="20" keywordseo="aadhaar" source="keywords">Aadhaar</keyword> card. TDS is Tax Deducted at Source and TCS is Tax Collected at Source in India. The Central Board of Direct Taxes (CBDT), has issued a circular dated August 5, in view of genuine difficulties being faced by taxpayers. Through the circular, the government said it has relaxed the provisions of TDS/TCS, as per the Income-tax Act, in the event of death of deductee/collectee before linking of PAN and Aadhaar. In order to redress the grievances of the taxpayers wherein instances have been cited, of demise of the deductee/collectee on or before May 31, 2024 and before the option to link PAN and Aadhaar could have been exercised, the circular provides that there shall be no liability on the deductor/collector to deduct/collect the tax under the relevant section of <keyword id="19936187" type="General" weightage="20" keywordseo="income-tax-act" source="keywords">income tax act</keyword>, pertaining to the transactions entered into up to March 31, 2024. On April 23, 2024, CBDT extended the date for linking of PAN and Aadhaar May for the taxpayers (for the transactions entered into up to March 2024) to avoid higher TDS/ TCS, as per the income tax act. Under the provisions of the Income-tax Act, 1961, every person who has been allotted a PAN as on July 1, 2017 and is eligible to obtain <keyword id="20030312" type="General" weightage="20" keywordseo="Aadhaar-Number" source="keywords">Aadhaar Number</keyword>, is required to intimate his Aadhaar to the prescribed authority, on payment of a prescribed fee. Failure to do so shall attract certain repercussions under the income tax act. As per government, the PAN of taxpayers who have failed to intimate their Aadhaar, as required, shall become inoperative and the consequences during the period that PAN remains inoperative will be as follows: 1. No refund shall be made against such PANs 2. Interest shall not be payable on such refund for the period during which PAN remains inoperative 3. TDS and TCS shall be deducted /collected at higher rate, as provided in the income tax act.

You Searched For "tax deductions" and got 10 results

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