• The new law increases the AMT exemption amounts for two years.
Estate tax
• The Tax Relief Act sets the estate tax exemption at $5 million
per person and $10 million per couple for estates of decedents dying in 2011 and
2012.
• The new law reunifies gift and estate taxes. The gift tax
exemption increases to $5 million per person for gifts made in 2011 and 2012.
• The new law also caps the tax rate at 35% for estates, gifts,
and generation-skipping transfers.
• The new law provides a choice for estates of decedents who died
in 2010 to use the new estate tax exemptions/rates with a stepped-up basis rule,
OR to use the existing 2010 law with no federal estate tax but a limit in the
amount of basis step-up that is allowed.
• The new law allows for "portability" of the estate tax
exemption, meaning that any unused estate tax exemption of a deceased spouse can
be carried over and utilized by the other spouse who dies second.
Tax Law Changes Surrounding
Insurance and Other Areas as A Result of Health Care "Reforms"
CLICK HERE
for an Overview of the "Patient Protection and Affordable Care Act of
2010", better known as "Obamacare" & the
Health Care and Education Reconciliation Act (HCERA) of 2010.
Tax
Control Vehicles:
Many
people are searching for ways to better control their taxes. Are there
sound and legal ways to accomplish this? The answer is yes!
First,
there are several forms of tax (income, estate, investment, etc.), so it is important to specify which form of tax
you are concerned about. You then need to isolate the proper "tax
control vehicle" that can achieve the results you are seeking. Throughout this web
site each of the following "tax control vehicles" are
described, and you can find out more about them by looking for them within our Services
page. Some of these vehicles are separately represented through Paul M. League -
League Financial Services at:
www.LeagueFS.com.
We
offer several "tax control vehicles" that either reduce, defer, or
eliminate the various types of taxes altogether.
I.
Recommended "tax reducer" vehicles, to reduce income taxes,
include certain Real Estate Limited Partnerships, which provide tax credits
resulting in dollar for dollar reductions of income tax.
II.
Recommended "tax deferral" vehicles, to defer income taxes
on invested assets,
include non-qualified tax deferred Annuities. When
"annuitized" they also work as a "tax reducer", since
part of the income they generate is considered a return of principle and
therefore non-taxable ("Exclusion Ratio"). Stocks are another tax deferral
vehicle, that put off short or long term gain taxation, until the sale of the
asset which can be many years later and after the assets have gained
considerable value and one may be in a lower tax bracket. Stocks can also be a source of tax reduction when
sold for a loss, as they can be used to offset capital gains on a dollar for
dollar basis, with excess loss carry forward to future tax years.
IRA's,
both ROTH and Traditional, are recommended vehicles for tax deferral.
In the case of ROTH IRA's, one can also achieve income tax elimination,
through qualified withdrawals.
Coverdell, Education Savings Accounts
("ESA's"), better known to many as "Education
IRA's", provide not only tax deferral of investment gains,
but also tax free
payments for eligible education expenses.
HSA's,
or Health Savings Accounts (Health Insurance with a tax deferred
savings account), are another recommended vehicle for "tax deferral"
of earnings on those funds.
The "savings component" of these plans can be fully funded each and
every year, through age 64, regardless of whether or not any reimbursements have
or have not been made. Some, therefore, refer to the HSA as a "Super
IRA" because not only can you put a sizable amount of money into an HSA
year in and year out, but you also have access, on a tax free basis, for
reimbursement of eligible medical expenses. Additionally, the tax free
reimbursements are based on a more broadly, federally defined, "eligible
medical expenses" definition, or listing of allowable expenses, that often
far surpasses the limits of any Insurer's plan or State mandated benefits.
Finally, one does not have to first exceed 7.5% of AGI (Adjusted Gross Income)
to be able to take deductions for these eligible medical expenses, as is the case with
traditional health insurance plans.
For
businesses recommended "tax deferral", as well as tax deduction
vehicles, include Pension and Retirement Plans. There are many
versions of these suitable for various size Groups, with a few specific
offerings and plan designs especially well suited to the sole proprietor and/or
small business owner, a number of which specifically favor owner/key employees
with the lion share of plan contributions & benefits, while not violating
anti-discrimination rules and testing.
III.
Recommended "tax eliminator" vehicles, to eliminate income taxes,
include Term & Cash Value Life Insurance that provide tax free death
benefits to beneficiaries. Cash Value Life Insurance also
servers as meaningful accumulation vehicle for "tax deferral",
and, if not "over funded" (i.e. converted by over funding into a
"MEC", or Modified Endowment Contract), can also provide a tax free
income stream (under current tax law). When Life Insurance is owned outside
of an insured's Estate, as in an Irrevocable Life Insurance Trust
("ILIT"), it, as an asset, avoids taxation.
Disability/Income
Protection Insurance, when premiums are not deducted by an individual,
provide tax free income benefits that eliminate income tax on any
income benefits received during disability.
Another
recommended tax eliminator vehicle, to eliminate income taxes, is a Municipal Bond Fund/Unit
Investment Trust, where both State
and Federal income taxes can be eliminated on all generated income.
Tax
Tips:
A Slip of the Lip May Bring on a Tax Audit
Many taxpayers have learned, to their dismay, that it generally isn't wise to talk carelessly about their taxes — especially about sensitive areas. Why? Because the wrong person overheard their careless talk and "turned informer," either for revenge or in the hope of an "informer's reward."
An informer's "tip" to the IRS will often trigger a tax audit. Even though the taxpayer has done nothing improper, he or she may have to suffer through the audit. Not only is this time-consuming, it can also result in additional taxes due to the discovery of an innocent error on the return or the disallowance of a marginal deduction.
TIP: Most informers are disgruntled employees and former spouses or lovers.
