Synergy Blog

Now Is the Time to Defer Taxes on Contingent Legal Fees: When does a 0% rate of return make sense?

As the Republican Party takes control of the White House and Congress in 2017 we can expect some changes to the tax code. Now is the time to consider doing some planning to take advantage of what likely will be a lower effective rate for attorneys and other investors.

President-elect Donald Trump released his plan earlier this year. For the purposes of this blog, we will use his proposed plan and the current estimated 2016 plan under President Obama to illustrate what the tax differential is likely to be. We pulled both of these charts from The Tax Foundation website (www.taxfoundation.org)

 

 

In an effort to keep things simple, we are only going to discuss the marginal tax brackets; however, it is safe to assume that other deductions and credits will also change moving forward. For an attorney, filing jointly, that earns in excess of $231,450, they can see a potential tax savings of 6.6% annually. The current 10-year treasury rate is under 2%. If you can combine a traditional tax deferred attorney fee structure with a marginal tax savings, you can see a 3-9% return on your money.  Not bad for taking little to no risk on an investment!

Ask us how to start deferring taxation for contingent legal fees today.

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