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Winter 2013 Newsletter
With
all of the talk about the “Fiscal Cliff,”
and “Sequestration,” it makes one feel anxious
and off-kilter. And with good reason: there
is so much uncertainty out there that it
is very difficult to plan for our financial
futures with any degree of certainty. However,
the government has stepped in and made what
was very uncertain a little less so. This
Newsletter will focus on some of the changes-and
non-changes- in the tax laws as may apply
to your family and you.
Estate Taxes
Many of you will recall all of the talk
about the “Bush Tax Cuts.” You may remember
all of the excitement back in 2010 when
estate taxes were reduced to zero. For the
following year, the taxes were set to revert
to the estate tax levels of 2001: with a
$1 million exclusion and a 55% maximum tax
rate. But in 2010, a $5 million exclusion
with a 35% maximum tax rate was enacted
into law. That change was scheduled to expire
on December 31, 2012. Never were the telephones
busier in law offices and accounting practices
than during the final weeks of 2012 with
interested clients hungry for advice as
to what to do.
Fortunately, the 2012
Tax Act was passed, signed by President
Obama, and, at the every least, it sets
forth permanent rules. Interestingly, it
kept the Bush Tax Cuts in place for almost
everyone.
For individuals who die
on January 1, 2013 or thereafter, the legislation
provides permanent guidance. It sets forth
a permanent exclusion amount of $5,250,000
with a maximum estate tax rate of 40%, adjusted
for inflation.
The 2012 changes made
permanent the “portability” feature which
allows an unused estate tax exemption for
the first spouse to die to be used by the
surviving spouse on her death. That is not
automatic, however; be certain that as the
surviving spouse you file the Form 706 timely,
and elect to add your husband’s unused exemption
to your future exemption.
Gift Taxes
The 2012 Tax Act raised the annual gift
tax exclusion from $13,000 to $14,000 for
2013. Married couples may “split their gifts,”
thusly gifting $28,000 to each donee, ordinarily,
a child, without incurring any gift tax
liability. (While this is a terrific tax
exclusion it is not considered an exempted
transfer for Medicaid purposes. Such a gift
will trigger a transfer penalty when an
applicant is seeking institutional Medicaid
coverage.)
As with estate taxes,
the gift tax lifetime exclusion is $5,250,000,
with a maximum gift tax rate of 40%, adjusted
for inflation.
Income Taxes
The 2012
Act permanently extended the existing income
tax rates for all single taxpayers with
taxable incomes below $400,000, and for
married couples with taxable incomes below
$450,000. Limitations on itemized deductions
or personal exemptions may cause tax increases
even on singles earning less than $400,000
or married couples earning less than $450,000,
however.
Legislators addressed the
issue of capital gains by raising the maximum
tax rate when one sells equities or other
capital assets from 15% to 20%, the higher
rate being applied to those single taxpayers
earning more than $400,000, or married couples
earning more than $450,000. Taxpayers under
those threshold amounts shall pay the 15%.
The
above is just a brief list of the issues
addressed by the 2012 Tax Act. It is a very
good idea to schedule a meeting with your
financial planner to review the rules that
apply to you. For further information go
to www.irs.gov.
The above
list is for general information purposes
only. It is not intended to constitute individual
legal advice or a specific recommendation
to any particular client./font>
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