Tax laws have a direct and significant influence on your estate plan. Throughout an election year, such as this year, the fate of numerous tax laws is frequently unsure. Scheduling an evaluation of your current estate plan with your estate planning lawyer is a great way to make sure that your plan benefits from the current tax laws and prepares for any scheduled modifications.
A modification in administration could lead to a change in viewpoint with regard to tax laws. As the tax laws currently stand, there are a variety of them that are set to expire or change for 2013 including the following:
Investments: The optimum rate for long-term capital gains could increase to 20% from 15% unless Congress acts prior to the end of the year. Stock dividends, presently taxed at a maximum of 15%, will likewise be taxed as regular earnings, with a top tax rate of 39.6%
Estate Tax Exemption: Currently at $5 million, the exemption is scheduled to hang back down to $1 million next year in 2013.
Gift Tax Exemption: Likewise currently at and all time high of $5 million and set to return to $1 million in 2013.
Estate Tax and Gift Tax Rates: Currently set at a maximum of 35%, both will go back to a maximum rate of 55% on January 1, 2013 absent action by Congress.
Payroll Tax Cut: Includes about $40 to the typical employee’s take house pay. Congress extended the tax cut through 2012, however its future is uncertain.
Tax Rates: President Bush executed a tax rate cut that is still in effect putting the rates at 10% – 35%. If they expire, individual tax rates will go back to 15% – 39.6%.
Alternative Minimum Tax: The AMT was initially meant to prevent high income taxpayers from avoiding taxes; nevertheless, it was not indexed for inflation, leading to more taxpayers being needed to utilize the AMT throughout the years. A “patch” has been utilized by Congress each year to repair this, but the “patch” does not extend to 2012 at this time. As many as 31 million taxpayers are expected to be impacted if another Patch is not forthcoming.
Tax Deductions and Credits: Various short-lived reductions and credits have actually been embraced to help relieve the financial tension of the recession. There is no guarantee that these will be extended.