Gift leaseback: How would you like to get a double deduction for your businesd equipment?
Concept: Give away depreciated property to relatives and lease it back. You have mostly depreciated the equipment and now get to deduct the lease payment. Thus, you get a double deduction for equipment. In addition rent payments aren’t subject to social security and Medicare.
You can do this technique with anyone such as your spouse, kids, grandkids, nephew, siplings, parents or significant other. This works best with relatives in low tax brackets that you will be supporting anyway. However, it can also work with spouses. You get a full deduction in your business for the lease payments, but the spouse picks up the payments for income tax only. There is thus a saving in social security and Medicare. Pretty neat when you think about it.
This becomes perfect for kids who are away. You can put the assets in trust and lease them from the trust. Moreover, if someone sues you after this technique is in place, the assets are protected from law suits since you don’t own them. Thus, you have asset protected yourself too. Some states require a trust to both own and receive the funds if the beneficiaries are minors. Thus, you should go to a good tax professional before you set this up.
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