Saturday, November 6, 2010

Estate Tax, part 8

Now that 2010 is almost over, it seems that there is virtually no chance that the Estate Tax will be changed for this year. (Nothing is impossible, but it does not seem likely.)

There is no estate tax for 2010, but if heirs sell assets they inherit, they could incur a capital gains tax. This is because inherited assets will be valued at their original cost (or other basis) value rather than at the fair market value as of the date of death. However, for most people this will be offset by a $1.3 million step-up in value (up to fair market value) available per estate. Assets inherited by a spouse get an additional $3 million step-up in valuation.

The estate tax for 2011 is yet to be determined. It is scheduled to revert back to 2001 law, but Congress will most likely change that, as no one wants 2001 to come back.

Friday, November 5, 2010

Year-end Planning

Tax planning for the end of 2010 is a bit more difficult this year, because Congress has still not decided what the tax rates will be for 2011. This could be important for some people who can choose to accelerate income or deductions into 2010, or defer them until 2011. Kiplinger is still predicting that the 2010 tax rates will be carried over to 2011. That may be a workable assupmtion for many people, but nothing is certain until it actually happens.

Some of the current tax provisions may be worth reminders. One particularly nice one for those who can benefit from it is that long term capital gains for people in the 10% and 15% brackets are not taxed at all. That's right, 0% tax. The 0% rate applies up to $34,000 of taxable income for single people and $68,000 for married filing jointly.

Just to recap the Standard Deductions for 2010, they are:
$5,700 for Single
$8,400 for Head of Household
$11,400 for Married Filing Jointly
For people 65 and over:
$7,100 for Single
$9,800 for Head of Household
$12,500 for Mariied Filing Jointly


For year-end planning for your individaul situation, contact your tax professional!