Here's a hack to reduce taxes on interest and dividends earned for the family. Put the assets in a custodial account for a minor dependent. In 2025, the first $1350 of a minor dependent's unearned income in 0%. Unearned income includes dividends, interest, and capital gains. There are other ones, like IRA distributions, rents and royalties, but probably not relevant for most dependents.
$27,000 earning 5% interest is $1350 annually, which is tax free if earned in a dependent's custodial account. No tax return needs to filed if unearned income is less that $1350.
The only requirement is all the funds in a custodial account must be used for the benefit of the dependent. However, that is easily done. Funds withdrawn can be used for the dependent's allowance or the fractional part of their rent, food, clothing, education expenses. Therefore, the interest/dividends earned can be easily withdrawn and spent on an annual basis to comply with IRS regulations regarding custodial accounts.
This is not financial nor tax advice. Please consult a professional advisor.
Copyright © 2025 Achievement Catalyst, LLC
Subscribe to My Wealth Builder
No comments:
Post a Comment