Individual Strategies

Potential Pitfalls of Digital Assets and the “Kiddie Tax”

Those of us who are parents of Gen Z children know it’s “no cap ” that we have no clue what our children get up to on the internet. My son, for example, makes a lot of YouTube videos of our cat for some reason. Thankfully, he hasn’t monetized his videos (yet!), so they don’t carry any tax consequences. However, many taxpayers are finding out that their dependents have spent their time in the metaverse, defi gaming, or nfts, and as a result have engaged in dozens to thousands of taxable transactions without even being aware it. Those transactions may also trigger the “Tax on a Child's Investment and Other Unearned Income,” also known as the “Kiddie Tax.” Read on to learn more...

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Think Outside the Tax Box provides tax reduction strategies along with practical implementation advice in order to reduce your clients’ federal tax bill with ease.

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CURRENT EDITION

An Analysis of the OBBBA’s Trump Accounts (Part 2)

Tyler Menzer, CPA, PhD

In part one of this series, I went over the basics of the new retirement accounts for minors, Trump Accounts, which were created as part of the One Big Beautiful Bill Act (OBBBA). Trump Accounts allow the Government, Charitable Organizations, Parents, and others to contribute to a child’s savings, usually on an after-tax basis. These accounts then transition to a traditional individual retirement account (IRA) when the child turns 18. Although the contribution limits act like non-deductible traditional IRA contributions and have a contribution limit of only $5,000 per year, they do not have the same earned income requirements that traditional IRA contributions have. This means that children are able to accumulate savings even without earned income. This article presents several scenarios to examine how Trump Accounts may play into an overall savings strategy for children.

Another Tax-Smart Way to Save for Retirement

Jeff Stimpson

Most clients are familiar with the well-known accounts to save for retirement, such as the 401(k) and IRA. Some clients might be able to supplement those with a lesser-known vehicle as well. A life insurance retirement plan (LIRP) is a type of permanent life policy with a cash value basically funded by overpaying premiums. The money can eventually be taken as a tax-free loan against the policy for anything from medical expenses and long-term care to supplemental retirement income to, for the wealthy, the payment of taxes on large estates.

Taxes & Taxidermy: Rampaging Through The Tax Code On The Back Of A Stuffed Rhinoceros

Amber Gray-Fenner, EA NTPI Fellow USTCP

Is the taxidermy fee for a stuffed bear deductible? If so, should I depreciate it? What would the basis and class life be for depreciation? Those are real questions asked in a group chat with some colleagues. Of course my answer was “It depends.” And, like all good tax professionals, I proceeded to ask a series of follow-up questions. And, like a good writer, that got me to thinking about all of the tax-related case law surrounding taxidermy and what it can teach us—it’s more than one might think.