The things that just doesn’t go away with corporate life are taxes. But just because taxes are there to stay doesn’t mean business owners don’t have means to ease the amount the pay annually.
Business owners who are eligible can make use of RPT or restricted property trust so they can minimize the tax on annual income. Business proprietors can save a good amount of money on taxes with a Restricted Property Trust or RPT trust.
So what is an RPT trust? Here listed, are some information and insights about this somewhat overlooked method of tax reduction
What Restricted Property Trust is all about.
An RPT allows business proprietors to save a good amount of money on taxes and grow assets.
Business proprietors will be making totally tax-deductible annual contributions 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.
This will cause businesses to be able to minus all the contributions they have made to the RPT, pay no tax on said contributions, and pay less taxes on distributions.
Once an eligible corporation has set up 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.Both the employees and the owner of the business fall under this criteria
Participants have to claim a part of the contributions they make as a taxable income.But it is required that they state that 30{9240367ca7c9081b6a95881a33af9ca7e989cb22e61da32c0614062dd38653a2} of the contribution is as such.
This equates to about 15{9240367ca7c9081b6a95881a33af9ca7e989cb22e61da32c0614062dd38653a2} tax rate, a much lower number compared to the rates you pay from individual income taxes.
Who Can Sign Up 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.
The Capacity to Handle the 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 more established corporations are not threatened by this amount and can even handle to contribute a higher amount.
Fifty-thousand dollars is a big amount of money, this is especially more apparent for the smaller corporations. This is the reason why RPT funds are only ideal for bigger corporate business proprietors with bigger 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.