TaxPlanning News & Analysis
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Five Tax Tips Before Selling Your Business
Entrepreneurs looking to sell their businesses often overlook tax planning, potentially losing significant savings. A survey by BNY Wealth highlights that nearly half of professional advisors report their clients spend insufficient time on tax and wealth transfer planning. Michael Paulus, founder of PCM Encore, noted a similar oversight cost him hundreds of millions during the sale of Assurance IQ for $2.4 billion in 2019. Edward Renn, a lawyer with Withers, advises business owners to assess their eligibility for the Qualified Small Business Stock (QSBS) tax exclusion. This exemption allows reduction of capital gains taxes if stock is held for more than five years. The One Big Beautiful Bill Act increased the maximum exemption to $15 million for stock issued after July 4, 2025. The QSBS exemption has specific eligibility requirements and excludes many trades like healthcare and accounting. For ordinary investors, considering tax strategies like the QSBS exclusion could significantly maximize the proceeds from a business sale, making long-term planning crucial.
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Roth IRA Conversion Plan Saves $600,000 Before Age 73 RMDs
A 63-year-old couple with $1.5 million in a traditional 401(k) plans to convert $600,000 to a Roth IRA at $75,000 annually over eight years. This strategy allows them to lock in a tax rate below 22% before required minimum distributions (RMDs) combine with Social Security benefits at age 73. Spreading conversions helps them avoid Medicare surcharges, which can reach $6,900 per person. This careful tax planning could save the couple tens of thousands of dollars in avoidable taxes, making it beneficial for ordinary investors approaching retirement to consider similar strategies.
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AI Limits in Personal Finance: Experts Highlight Key Considerations
Artificial Intelligence is being used by many Americans for financial advice, but effectiveness depends heavily on user input quality. Andrew Lo from MIT emphasized the importance of prompt engineering for achieving better results. While AI can provide general guidance, it struggles with specific financial calculations, such as tax planning, where precise analysis is crucial. The average tax refund increased by 11.2% according to the latest IRS filing data, indicating ongoing changes in the financial landscape for consumers. Users must exercise caution and not rely solely on AI for detailed financial decisions.
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