Carry tax reduction strategies
Received my first ever set of carry docs last week. Do you have any suggestions on tax reduction strategies? Thanks and happy holidays!
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Ya, live in a state with a low capital gains tax. Apart from that, there isn't any.
If there is a mechanism that allows you to hold the carry through an LLC, you won't be subject to the SALT deduction limits when you receive the distributions. Some firms actually do this structuring for you internally, and some won't entertain the option, but it can't hurt to ask.
Salt deductions are maxed at 10k, which is a drop in the bucket if you're earning millions in carry.
That's the point. If you receive the carry through an LLC, you are not subject to the $10,000 limitation. That limitation only applies to individuals. So when you receive your $5m carry payment and pay a combined 15% for NYC and NYS taxes, the $750,000 is a deduction on your federal taxes, saving you 37% of $750k, aka $277,500 tax bill reduction vs. if you received the payment directly as an individual.
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