Expiration of Bush Tax Cuts Likely Will Raise Income Taxes for Everyone

If The President and Congress do not act before the end of the year, many significant tax cuts from the Bush era will expire. One of the significant tax increases will be in the area of estate taxes.  If action is not taken these tax laws will revert back to what they were in 2001, and the exemption for bequests at death will drop to $1,000,000.

Additional taxes that will increase, if action is not taken, include income taxes (by removal of the 10% bracket and increases in the 25% or higher brackets) and long-term capital gains (which will be increased to 20%).  Many favorable tax breaks, such as bonus depreciation, will no longer be available.

Tax planning strategies are extremely important to ease the transition into 2013. A good year-end tax plan could make a huge impact on taxes paid after the first of the year. With a successful strategy, the ill-effects of the Bush Tax Cuts expiration will be lessened.

© 2012 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

Estate and Income Tax Increases Likely in 2013

Unless Congress acts prior to year end, a variety of taxes will increase automatically on January 1, 2013.  Income tax rates and capital gain rates will increase on January 1.

A new 3.8% Medicare tax comes into effect on January 1, 2013.  The new Medicare tax is imposed on is imposed on investment income in excess of certain thresholds (adjusted gross income of $200,000 single/$250,000 married).  Investment income includes income received from rents, stocks, bonds, mutual funds and other investments.  Income that is derived in the ordinary course of a trade or business is not included.  Taxpayers should review investment portfolios, asset structure, and business structure to minimize the impact of the new tax.

The estate tax exemptions for gifts during life or at death and the generation skipping transfer exemption will decrease from $5.12 million to $1.0 million, $1.0 million and $1.4 million respectively.  Those with assets in excess of $1.0 m should at least review and consider planning options prior to December 31, 2012.

© 2012 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com