Thinking about taxes on a sunny summer day? Me too! In fact, I wish more people were as proactive as yourself.
Today, my goal is two-fold: reduce the risk of bad stuff happening to our estates and reminding my readers that the they should be asking questions. I say this because being able to recall issues to bring to the attention of an estate planning attorney or Certified Public Accountant might end up saving you or your family from a huge headache or a financial loss.
Before we start talking about taxes, consider this: individuals and families are still trying to unpack the rules under the “Tax Cuts and Job Act“, which was the most recent tax bill passed by our Federal Government. With the summer months, many have put this info aside. Luckily, you are different.
Of the 2️⃣7️⃣5️⃣ amendments to the #Tax bill passed in December ⛄️, the rules impacting our estates 🏡 the most included: doubling ⬆️ the estate and gift 🎁 tax exemption and repealing contribution restrictions on Individual Retirement Accounts. 👍
Thus, I wanted to quickly highlight a handful of issues some of my Clients are seeing.
Tax Benefits For Families And Individuals
(Sec. 11021) This section temporarily increases the standard deduction to $24,000 for married individuals filing a joint return, to $18,000 for head-of-household filers, and to $12,000 for all other taxpayers. The amount of the standard deduction is indexed for inflation after 2018 using the chained CPI.
Taxes and Increases In Estate And Gift Taxes
(Sec. 11061) This section doubles the estate and gift tax exemption amount for decedents dying or gifts made after December 31, 2017, and before January 1, 2026, by increasing the basic exclusion amount from $5 million to $10 million. (Under current law, the amount is indexed for inflation occurring after 2011.)
Taxes and Retirement Plans
(Sec. 13611) This section repeals the rule that allows Individual Retirement Arrangement (IRA) contributions to one type of IRA (traditional or Roth) to be recharacterized as a contribution to the other type of IRA.
(Sec. 13612) This section increases the limit on accruals that is required for length of service award plans (LOSAPs) for bona fide volunteers to be exempt from treatment as a deferred compensation plan.
(Under current law, plans paying solely length of service awards to bona fide volunteers or their beneficiaries on the account of firefighting and prevention services, emergency medical services, and ambulance services performed by the volunteers are not treated as deferred compensation plans if they meet certain requirements. One of the requirements is a limit on the aggregate amount of length of service awards that may accrue with respect to any year of service for any bona fide volunteer.)
The bill modifies the limit on accruals to: (1) increase the limit from $3,000 to $6,000; and(2) provide for a cost-of-living adjustment to the limit after 2017.
Taxes on a Hot Summer Day
As you can see, taxes and a hot summer day go hand-in-hand. If you disagree, then know this: half the battle of finding tax opportunities is knowing which questions or issues to address with your personal advisor.
