Restricted Property Trust fpr Reducing Annual Taxes
Taxes are a norm in corporate life, it will always be part of it. But just because it’s inevitable doesn’t mean business owners don’t have any means of minimizing the taxes.
Eligible business owners have a little something called RPT or restricted property trust in order for them to cut down their annual income tax. Restricted Property Trust or RPT trusts help business proprietors save money on taxes.
So what is an RPT trust? Below are some insights about this often overlooked way of reducing tax.
What Restricted Property Trust is all about.
RPT allows business owners the chance to be able to minimize the taxes they pay and grow assets.
Businesses will pay yearly, completely tax deductible fees to a restricted property trust.
This simply means that the accumulation of the money is virtually tax-free until the owner wishes to withdraw the funds.
What happens is that business will be able to minus their restricted property trust, pay no tax on those contributions, and pay less taxes on distributions.
After an eligible corporation has setup for a restricted property trust , participants will contribute annually for 5 years a minimum contribution of $50,000. You must be a shareholder in some way in the said corporation in order to be a participant.This encompasses both business owners and employees.
The participants are obliged to take a portion of their contributions in the form of taxable income.But it is required that they state that 30% of the contribution is as such.
Equating in about 15% tax rate, this will marginally lower than those of the rates you get from individual income taxes.
Eligibility for a Restricted Property Trust
All of the corporate entities are eligible for restricted property trust. Sole proprietors however are not eligible. This is because it is the corporations that usually face higher tax rates.
Capacity to Make Yearly Contributions
For corporation to be able to setup for a restricted property trust , participants will contribute annually for 5 years a minimum contribution of $50,000. Bigger and more established corporations will find this amount very doable and not troublesome, they can even manage to contribute past the minimum.
$50,000 is not a small amount, especially for the more modest corporations who are just starting out. Thus, RTPs are an ideal choice only for bigger corporations with higher assets.
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If used accordingly, Restricted Property Trust can be a great way for corporations to minimize the burden of taxes. As well as being a great tactic for businesses with higher income who would want a tax easy way of asset management.