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Die Now, Save Money! Estate and Gift Tax Law Changes for 2011 and 2012

While some women stay up late at night reading romantic novels, I like to get under the covers on a cold winter night and read IRS Tax Code! There are tons of changes in 2011 and 2012 tax laws you should know about. If any of these rules, laws and accounting gibberish confuses you, don’t feel bad, be glad you have strange people like me to help! Drop me a note or sign up for one of our classes and we’ll help you learn how to reduce your tax liability!

Here we go Again! Estate & Gift Tax Law Changes for 2011/2012

But before we get to that, please note the new provision for wages earned in 2011 only:

Keep in mind, these are condensed, generalities of some of the tax law changes for 2011 and 2012 you should be aware of! For remuneration received during 2011, employees will pay a whopping 4.2% Social Security tax on wages up to $106,800 and self employed people will only pay 10.4% Social Security self employment taxes on that self employment income up to $106,800. Luckily, Medicare tax rates are unchanged.

Now, about that good old death tax! Estate & Gift Tax Law Changes for 2011 and 2012

  • A $10,000,000 exemption! Yeah. We like that part.  Increased Estate Tax Exemption and Reduced Top Rate.  The estate tax exemption in increased to $5 million and the tax rate on the excess is reduced to a mere 35%. ( Code Sec. 2010(c) , as amended by Act Sec. 302(a)) O course, the $5 million exemption is per person. Thus, there is a $10 million exemption for a happily married couple. If you don’t have the “happily” part then it’s still $10 million. Plus, there is a new portability feature for married couples on the go.
  • Here’s a little boost. The gift tax exemption increased. It is now unified with the estate tax exemption and is increased to $5 million.
  • Portability of Unused Exemption between Spouses. This new provision adds the unused $5 million exemption of a deceased spouse to the $5 million estate tax exemption for the surviving spouse allowing up to $10 million to pass to the family without the need for credit shelter by-pass trusts.  Yet, not all by-pass trusts should be definitely be eliminated since the income from such trusts need not accumulate in the survivor’s estate. The appreciation of the assets in such a trust is not included in the survivor’s estate.
  • Template for the future. On the flip side, families not expecting their assets will ever exceed $10 million need not have trust provisions in their estate plans and do not need to file trust income tax returns. To receive this tax benefit, an estate tax must be filed for the first spouse to die, even though one would not otherwise be required.  Even though this may act as a template for future tax laws, it does sunset in two years. Since there is little certainty about how these new laws will fare beyond the next two tax seasons, you should be reluctant to abandon estate plans exceeding $1 million assets.
  • This is the time for creativity and flexibility. This is the time to design options and backup strategies into plans to be prepared for future changes in the estate tax laws.
  • Fifty states – fifty ways. State-by-state estate and estate taxes will be a moving target in making solid estate-planning decisions.

Drop me a note or sign up for one of our classes and we’ll help you learn how to reduce your tax liability!

Have a prosperous day!

Gabby Huguenin

Wealth Coach

208-263-7202

Apocalypse 2012 Postponed Due to Extended Tax Breaks

Extended Tax Breaks Providing Tax-Cutting Opportunities!

According to MY calendar, not the Mayan’s, the only apocalypse you’re going to experience is the collapse of your cash flow and the raiding of your pocketbook if you don’t take advantage of your legitimate tax breaks! Remember, I always say…

“Plan like you’re going to live forever but live like this is your last day!”

Now, here are a few more tax tips to discuss with your tax reducing professional. And, if you don’t have a tax-reducing-professional, we should talk!

1.       Deep under Sec. 101 of the now famous, 2010 Tax Relief Act, the tax rate schedules for individuals remain at 10%, 15%, 25%, 28%, 33%, and 35% for a glorious two more years. All the way through 2012. Furthermore, the size of the 15% tax bracket for joint filers and their qualified surviving spouses remains at 200% of the 15% tax bracket for individual filers through the tax year of 2012.

2.       The standard deduction for you married taxpayers, filing jointly, and of course qualified surviving spouses, remains at 200% of the 15% tax bracket for all individual filers through 2012.

3.       There is no 3%/80% limitation on your itemized deductions for both 2011 and 2012.

4.       Parents rejoice! The $1k child tax credit has been extended and allowed to be used against regular income tax for two years, through 2012. But wait, there’s more! The formula for determining refundable child credit, with the earned income threshold of $3k (but not adjusted for inflation) is also extended for two more years, through, yup, you guessed it, 2012!

5.       Go back to school! Why? Because numerous education incentives have been extended two years. Nice incentive to graduate early?

6.       Uncle Sam generously boosted AMT exemption amounts for 2010 and 2011.

7.       Here’s a pile of nonrefundable personal credits. For example:

a. Dependent care credit
b. Credit for disabled and elderly
c. Child credit
d. Interest credit on certain home mortgages
e. Hope Scholarship and Lifetime Learning credits
f.  Non-business energy property credits
g. Residential energy efficient property credits
h. Plug-in electric vehicle credits
i. Alternative motor vehicle credits
j. And there’s more!

I don’t want to take all the credit but you should! Take your credits where you can get them! If you don’t have a money-saving, tax-cutting plan in place, you need to get with our Axe the Tax Program! It’s very simple.

We show you how to cut your taxes, legally, ethically, safely, and quickly to put more glide in your stride, more pride in your ride and more fun in your mun! Okay, that last bit was slightly over the top but my point is – Don’t pay taxes that Uncle Sam says you don’t have to!

Most American’s (especially, busy professionals with great cash flow) pay way too much in taxes because of three reasons.

1.      They don’t know how to reduce their taxes.

2.      They don’t have a plan to reduce their taxes

3.      They don’t have someone they trust to guide them to reduce their taxes.

None of those reasons is acceptable unless you like throwing away $10,000, $50,000, $500,000 in unnecessary taxes!

Remember, the above info is generalized and just for educational purposes. Everyone has a unique situation so talk to your tax planning professional before you do anything.

But REMEMBER! We put the AX in tAX. Please drop me a note if there is anything I can do to help you stash more cash! More tax saving tips from an earlier post.

Keep More – Leave More

Gabby Huguenin

208-263-7202