USA Law and Practice Contributed by: Diana Zeydel, Marc Selden, Benjamin Babcock and Brian Smith, Greenberg Traurig, LLP
1.3 Income Tax Planning The US income tax system offers several planning opportunities for individuals and families, in connec - tion with investment assets, charitable giving, trust planning, and the transfer of wealth to future gen - erations. Effective planning seeks to reduce current income taxes while preserving flexibility and minimis - ing future transfer taxes. Assets included in a decedent’s taxable estate receive a basis adjustment to fair market value on the dece - dent’s date of death (or, if elected, the alternate valu - ation date six months after death if the estate is sub - ject to estate tax). Unrealised appreciation during the decedent’s lifetime might escape federal capital gains tax, allowing fiduciaries of the estate and inheriting beneficiaries to dispose of inherited assets with mini - mal or no realised capital gain. Federal long-term capital gains are generally taxed at preferential rates of up to 20%, while short-term capi - tal gains are taxed at ordinary income tax rates. Some states treat capital gains as ordinary income; others have no income tax regimes, and some tax capital gains at preferential rates like the federal income tax regime. Recent legislative changes have increased the impor - tance of co-ordinating income tax and estate planning. For 2026, higher standard deductions, an increase in the state and local tax deduction cap (with certain eli - gibility limits) and a new overall limitation on itemised deductions for taxpayers in the top federal bracket may influence whether taxpayers itemise deductions, the timing of charitable contributions and state tax payments, and the recognition of capital gains. Trusts continue to play a central role in sophisti - cated income tax planning. A grantor trust may be structured to require the settlor to remain liable for the trust’s income taxes while allowing trust assets to grow income-tax free outside the settlor’s estate. Leveraged sales to grantor trusts remain widely used to shift wealth to lower generations without the appli - cation of wealth transfer taxes. As part of the recent legislative changes, several changes were made to the Qualified Small Business
Stock (QSBS) exclusions. A tiered exclusion was introduced, allowing taxpayers to exclude 50% of eli - gible gain after a three-year holding period, 75% after four years and 100% after five years. The legislation increased the maximum gain exclusion from USD10 million to USD15 million and raised the aggregate gross asset ceiling from USD50 million to USD75 mil - lion. With the expansion of benefits afforded to cer - tain owners of specified QSBS, many C corporation founders are exploring the creation of non-grantor trusts to make gifts of QSBS stock to “stack” addi - tional QSBS income tax exemptions. Retirement planning has evolved following SECURE 2.0 changes taking effect in 2026. Certain higher- income participants aged 50 or older generally must make workplace plan catch-up contributions on a Roth basis if their prior-year wages exceed the appli - cable threshold, and enhanced catch-up contribution limits may apply for certain participants aged 60 to 63. 1.4 Pre-Immigration and Exit Planning The US offers a variety of pre-immigration and exit planning opportunities for individuals, particularly high net worth individuals and internationally mobile fami- lies. Before becoming a US tax resident, individuals often review asset ownership structures, trusts and investment holdings to mitigate future US income and wealth transfer tax exposure. Planning opportunities may exist before relinquishing US citizenship or terminating long-term lawful perma - nent resident status. Individuals may seek to man - age potential exposure to the expatriation tax regime under US law, including reviewing asset dispositions, deferred compensation arrangements, trusts and succession planning structures before expatriation occurs. Many planning opportunities are available only before residency status changes, so advance planning is critical. 1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens Non-resident aliens may acquire and own US real property without restrictions under federal law. The ownership, operation and disposition of US real estate
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