Tax Concepts

The recently passed "One Big Beautiful Bill" (OBBB) introduces substantial tax benefits, creating valuable opportunities for family offices and real estate investors focused on preserving and growing wealth. Understanding and acting on these changes can significantly improve your investment strategy and offer lasting financial advantages: • Permanent 20% QBI Deduction: Provides long-term tax savings for pass-through entities, increasing profitability and investment potential. • Permanent 100% Bonus Depreciation: Enables immediate deductions on property improvements and tangible assets, significantly improving cash flow. • Increased Estate and Gift Tax Exemption: Exemption limits have increased to $15 million per individual ($30 million per couple), simplifying the transfer of generational wealth. • Expanded SALT Deduction: The limit for State and Local Tax (SALT) deductions, including property and income taxes, rises from $10,000 to $40,000 starting in 2025. Full benefits apply only to individuals with modified adjusted gross income (MAGI) below $500,000 (or $600,000 for joint filers). Above those levels, the deduction gradually phases out, ultimately reverting to $10,000 once income reaches approximately $600,000. • Enhanced Affordable Housing Incentives: A 12% increase in Low Income Housing Tax Credits makes affordable housing investments more financially attractive. Investors can achieve stronger yields while contributing to community development and meeting ESG objectives. These provisions offer more than incremental tax savings. They create strategic financial opportunities for real estate investment and wealth transfer planning. Are you prepared to take full advantage of these new tax opportunities? Now is an ideal time to review your investment and estate strategies. Taking action today can secure financial benefits for years to come.

🚨 𝗦𝗧𝗢𝗣 𝗽𝗮𝘆𝗶𝗻𝗴 𝘁𝗵𝗲 𝗵𝗶𝗱𝗱𝗲𝗻 𝟯.𝟴% 𝘁𝗮𝘅 𝗼𝗻 𝘆𝗼𝘂𝗿 𝘀𝘂𝗰𝗰𝗲𝘀𝘀! 🚨 For high earners, this is taxes on investment and business income. It's called the 𝗡𝗲𝘁 𝗜𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗜𝗻𝗰𝗼𝗺𝗲 𝗧𝗮𝘅 (𝗡𝗜𝗜𝗧), and it quietly adds an 𝗲𝘅𝘁𝗿𝗮 𝟯.𝟴% to your top marginal rate. It’s often avoidable, but only if you prove you’re a Material Participant. 𝗪𝗵𝗮𝘁 𝗶𝘀 𝘁𝗵𝗲 𝗡𝗜𝗜𝗧 (𝗜𝗥𝗖 §𝟭𝟰𝟭𝟭)? Lesser of: - Your NII, or - The amount your MAGI exceeds the threshold. 𝗙𝗶𝗹𝗶𝗻𝗴 𝗦𝘁𝗮𝘁𝘂𝘀 𝗮𝗻𝗱 𝗠𝗔𝗚𝗜 𝗧𝗵𝗿𝗲𝘀𝗵𝗼𝗹𝗱 (𝗮𝗽𝗽𝗿𝗼𝘅.):  1. Married Filing Jointly - $250,000  2. Single / Head of Household - $200,000  3. Married Filing Separately - $125,000 𝗧𝗵𝗲 𝗜𝗻𝗰𝗼𝗺𝗲 𝗦𝘂𝗯𝗷𝗲𝗰𝘁 𝘁𝗼 𝘁𝗵𝗲 𝗧𝗮𝘅: The tax targets passive/unearned income. This includes: - Interest, Dividends, Annuities, and Royalties. - Net gains from the sale of investment property (stocks, bonds, passive real estate). - Income from a trade or business that is a "Passive Activity" (where you do NOT materially participate). - 𝗧𝗵𝗲 𝗸𝗲𝘆 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆 𝗶𝘀 𝘁𝗵𝗶𝘀: 𝗔𝗰𝘁𝗶𝘃𝗲 𝗶𝗻𝗰𝗼𝗺𝗲 𝗶𝘀 𝗲𝘅𝗲𝗺𝗽𝘁 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝗡𝗜𝗜𝗧. 𝗧𝗵𝗲 𝗠𝗮𝘁𝗲𝗿𝗶𝗮𝗹 𝗣𝗮𝗿𝘁𝗶𝗰𝗶𝗽𝗮𝘁𝗶𝗼𝗻 𝗗𝗲𝗳𝗲𝗻𝘀𝗲: The single most effective planning tool to avoid the NIIT on your business or rental income is to convert it from passive (taxable) to non-passive/active (exempt). 𝟭. 𝗙𝗼𝗿 𝗦-𝗖𝗼𝗿𝗽𝘀 𝗮𝗻𝗱 𝗣𝗮𝗿𝘁𝗻𝗲𝗿𝘀𝗵𝗶𝗽𝘀 (𝗞-𝟭 𝗜𝗻𝗰𝗼𝗺𝗲) Your share of income from an S-corp or partnership is generally exempt from NIIT IF you materially participate in the activity. Ensure you meet one of the seven material participation tests (most commonly, the 500-hour rule) for that business. This is the difference between a K-1 distribution being taxed at (e.g.) 37% and 40.8% (37% + 3.8%). 𝟮. 𝗙𝗼𝗿 𝗥𝗲𝗻𝘁𝗮𝗹 𝗥𝗲𝗮𝗹 𝗘𝘀𝘁𝗮𝘁𝗲 Rental income is presumed to be passive. To exclude it from the NIIT, you must be a Real Estate Professional (REP) and materially participate in the rental activity. As discussed yesterday, you must clear the 50% test, the 750-hour test, and materially participate in the rental activity (often using the Grouping Election). 𝗖𝗮𝘀𝗲 𝗦𝘁𝘂𝗱𝘆: $𝟭 𝗠𝗶𝗹𝗹𝗶𝗼𝗻 𝗣𝗮𝘀𝘀𝗶𝘃𝗲 𝗜𝗻𝗰𝗼𝗺𝗲: A highly compensated executive (MAGI > $500k) has $1,000,000 in passive income from an investment in a Limited Partnership (LP). - Executive A (Passive Investor): Pays the 3.8% NIIT on $1,000,000. - Total NIIT: $38,000 - Executive B (Active Partner): Proves material participation in the LP's trade or business. - Total NIIT: $0 That $38,000 is saved before you even factor in the ordinary income tax rate. If you have a K-1, do you know whether the income is characterized as passive or non-passive? That single line determines your 3.8% exposure. What is the riskiest tax planning strategy you've seen high-earners use to reduce their MAGI and duck the NIIT? Share your stories below! 👇 #linkedinforcreators

Two decades ago, your family may have acquired property in a quiet town. Today, that same plot sits in an increasingly high-demand urban zone, and its value has likely appreciated significantly. But so has the complexity of selling it. One key consideration is Capital Gains Tax (CGT). In Kenya, CGT is levied at 15% of the net gain, and without proper documentation, that figure can become a painful closing cost. Firstly, to protect your gain and reduce your tax exposure, maintain a clear and defensible paper trail: -- Land rent and rates receipts to establish ownership history and compliance -- Tax records, including past declarations and any exemptions claimed -- Valid receipts for improvements, structural upgrades, not cosmetic tweaks -- Utility statements to verify occupancy and usage timelines -- Financial statements, especially for income-generating property -- Legal costs from acquisition to sale, which are deductible if properly recorded Secondly, this is where proactive planning makes all the difference: -- Before listing, model your potential tax exposure. This informs pricing strategy, negotiation posture, and helps avoid last-minute surprises. -- If documentation is incomplete, work with your lawyer to rebuild a credible cost basis using affidavits, bank statements, or third-party confirmations. -- For family-held assets, consider whether transferring ownership to a trust or company vehicle could offer succession or tax planning advantages, especially if future sales are anticipated. -- Engage a Tax Advisor early for smarter structuring, better documentation, and peace of mind. Legacy assets deserve legacy-minded planning. 

Meet "Mike", a SpaceX engineer. Mike has watched the value of his equity grow SUBSTANTIALLY in the last 10+ years.... With thoughtful equity planning, our models showed that someone in his situation could possibly save $60K+ in taxes over the next 3 years. Let me explain: SpaceX's current tender offer deadline is today. The company has been offering tenders 2x/year. These tenders let employees cash out options and vested RSUs without an IPO. The stock price has been on an absolute tear...now up to $212/sh. Mike and his colleagues have a decision: → Do I sell any now or plan around exercises? → Do nothing? The decision matrix is rarely simple: Factors: ↳ ISO vs NSO exercise timing ↳ Federal and California taxes ↳ AMT exposure and potential AMT credit recovery ↳ Exercise costs ↳ Liquidity needs Also, cashless exercise could spell trouble for ISOs given the fine print (potential conversion to NSO for that entire grant)... The starting point in our hypothetical model: ↳ High six-figure salary ↳ Substantial vested ISO and NSO positions ↳ AMT credit carryforward from prior years ↳ Big personal goals on the horizon We modeled several exercise strategies over three years: → Split ISO exercises across two years, with NSOs exercised all this year → Exercise everything this year (ISO and NSO) → Delay most ISO exercises until the following year We looked at: → Federal vs AMT in each year → State tax impact → Annual cash needed Result from the model: The difference between the most and least favorable strategy was about $60,000 in cumulative taxes over 3 years. Why timing mattered in the model: ↳ Exercising too much ISO bargain element in one year pushed income above AMT exemption phaseout, triggering more 28% AMT ↳ Exercising too little caused a spike the next year, with less credit recovery ↳ The middle ground smoothed AMT exposure and maximized credit recovery Most people pick a round number of shares to exercise. In our scenario, Mike picked the number based on: ↳ AMT thresholds ↳ State tax interaction ↳ Credit carryforward utilization That was the difference in the model between paying an extra $60K to the IRS & FTB or avoiding it.... Risks and considerations: → Actual results will vary. Tax savings are not guaranteed. → Stock price, company valuation, and tax laws can change. → Exercising options can create tax obligations before shares are sold. → Concentrated stock positions carry risk if the company value falls. Tender deadlines are emotional. The right analysis makes them strategic. If you are holding equity and facing a decision window: → Get the math right → Find an advisor & CPA who understand equity intimately → Understand the risks as well as the potential benefits → Make sure your decision aligns with your goals This example is hypothetical, based on modeled assumptions described above. It is for illustrative purposes only and is not a guarantee of results. Names and details have been changed.

💡 Here’s what I learned today about tax planning: EIS and SEIS can save you thousands in tax while supporting UK innovation. This is mostly applicable to higher earners, but relevant to any UK taxpayer who faces big income tax bills or capital gains. The Enterprise Investment Scheme (EIS) and Seed EIS (SEIS) are government-backed ways of directing capital into UK innovation — and the incentives are surprisingly generous. With EIS, you can invest up to £1m a year (or £2m if the companies are Knowledge Intensive). You get 30% of that back as income tax relief, and you can carry the relief back a year. Put in £100k and your income tax bill drops by £30k. With SEIS, the numbers are even punchier: up to £200k a year invested, and you get 50% back against income tax — £100k invested cuts your tax bill by £50k. Then comes the capital gains angle. If you reinvest a gain into EIS, you can defer the CGT for up to three years after the disposal (and even roll it indefinitely if you keep reinvesting). If you die holding the shares, the deferred tax is wiped entirely. With SEIS, half the reinvested gain is simply exempt. On top of that, any growth in the value of EIS/SEIS shares is free of CGT if you hold them three years or more. And because most of these shares qualify for Business Relief, they can also be free of inheritance tax after two years. For higher earners thinking about succession and estate planning, that’s powerful. Even the downside is cushioned. If an EIS or SEIS company fails, you can set the net loss against income tax or CGT, which often means your real cash risk is only ~40p in the pound. So, to summarise: income tax relief, CGT deferral or exemption, tax-free growth, inheritance tax benefits, and downside protection. Not bad for something designed to back the next generation of UK entrepreneurs. Bottom line: For anyone paying £200k+ a year in income tax or with lumpy capital gains, EIS and SEIS are worth serious consideration — they can dramatically change your after-tax outcome while supporting UK innovation. I like this 😊 BTW I’m not a tax adviser — this is just what I’ve learned going through my own planning. If you’re interested, definitely talk to a proper tax expert before making decisions.

Founders who don’t plan for taxes before their exit regret it later. You worked years to build your company. Now imagine selling it… only to lose 40%+ of the proceeds to taxes. That’s the reality for many founders who don’t prepare. Here’s how to keep more of your money post-exit: 1️⃣ Use a Qualified Small Business Stock (QSBS) Exemption – If you qualify, you could exclude up to $10M in capital gains taxes. 2️⃣ Structure a Deferred Payout – Spreading the sale over multiple years can lower your tax bracket. 3️⃣ Leverage Charitable Trusts & Donor-Advised Funds – Donating part of your equity before the sale can create major tax savings while supporting a cause you care about. 4️⃣ Move to a Tax-Friendly State – Some founders relocate to places like Florida, Texas, or Nevada before exiting to avoid state capital gains taxes. 5️⃣ Invest in a 1031 Exchange or Opportunity Zone Fund – Reinvesting your gains strategically can defer or eliminate certain taxes. 🚨 Biggest mistake? Waiting until AFTER the sale to think about taxes. 💬 Founders: What’s your biggest tax planning question? Let’s discuss. #ExitTaxStrategy #WealthPreservation #MergersAndAcquisitions #ExitToExcellence

Entrepreneurs whose businesses grow substantially over time can end up with an asset worth many millions of dollars, creating a potential 'problem' of exceeding the estate tax exemption amount. Which, in turn, can lead some of these individuals to ask their financial advisors for ideas on how to reduce or eliminate their potential estate tax exposure. https://kitc.es/41bsBHT In this guest post, Anna K. Pfaehler, CFP®, AEP, a Partner and Wealth Advisor at Constellation Wealth Advisors, explores one powerful tool to reduce the size of a business owner's estate: gifting shares in the business, whether directly to individuals or to a trust that removes those shares from the owner's estate. Notably, this strategy can be especially effective when shares are gifted before a dramatic increase in the value of the business or before the business is sold at a premium, as the gift and estate tax exemption applies to the value of the shares at the time of the gift. Which means that future appreciation in the value of the shares occurs outside of their estate. #estateplanning #taxplanning #advicers