For most people, thinking about estate taxes conjures up images of the ultra-rich. Yet even with provisions that permanently set the level at which estate taxes kick in at a fairly high amount, you should still know how the tax can affect you. Let’s take a look at four key provisions of the estate tax for 2014 that could help you avoid a big mistake that could hurt your family’s financial future for generations to come.
Estate Tax in 2014: 4 Things You Need to Know – DailyFinance
An estimated 180 million Americans pay federal income tax each year, and for many, the goal is to pay as little as possible. If that’s your objective, there’s still time to make sure you’re taking advantage of every opportunity to lower your tax liability for 2013, according to Dan Finn, Advanced Financial Planning Attorney at Northwestern Mutual. “Taking just a few steps today can have a significant impact on the amount you’ll owe at tax time in April.”
Northwestern MutualVoice: Last-Minute Tips to Lower Taxable Income for 2013 – Forbes
Dozens of tax laws are set to expire at the end of 2013. Many of these provisions are quite popular and likely will be extended by Congress. Exactly when or how lawmakers will get around to doing this is unclear.
The situation is complicated by the fact that both the White House and Congress want to enact serious tax reform in 2014. Key members of Congress and the Obama administration have proposed that extending or making permanent some of these expiring provisions be made part of the overall tax reform process instead of being done piecemeal though special tax extension legislation.
The expiring provisions of most importance to the real estate industry include:
Mortgage insurance premiums deduction: Since 2007, qualifying homeowners have been able to deduct premiums for mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, the Rural Housing Service, and private mortgage insurance. Homeowners whose incomes are not too high can treat such payments the same as mortgage interest payments. (IRC Sec. 163(h)(3)(E).) Unless the law is extended, no deduction will allowed for amounts paid or accrued after Dec. 31, 2013.
Discharge of indebtedness on principal residence exclusion: Since 2008, homeowners have been allowed to exclude from their taxable income up to $2 million of debt forgiven on their principal residence by a lender in a short sale, mortgage restructuring, or forgiven in a foreclosure. (IRC Sec. 108(a)(1)(E).)
Tax breaks real estate pros and their clients should be prepared to do without in 2014 | Inman News
Tax burden of 50 years ago wasn’t necessarily lighter
Do you yearn for the federal income tax rates of 50 years ago? The following information came from The Kiplinger Tax Letter of Nov. 22. "Income tax rates were a lot higher, starting at 20 percent and maxing out at 91 percent on taxable income over $200,000 for singles and $400,000 for joint filers. … Ditto, corporate tax rates … 30 percent on the first $25,000 and 52 percent above that. Capital gains and dividends were tax-favored. Half of the profit from assets that were held more than six months were excluded. The top tax on gains was 25 percent for single filers with taxable income over $18,000 and married couples over $36,000. Recipients of dividends from U.S. corporations were allowed a 4 percent tax credit on them."
Some of my thoughts on the matter include that fact than in 1963, there were no earned income credits, no dependent care credits, no credit for children younger than 17, no education credits and no residential energy credits.
Tax burden of 50 years ago wasn’t necessarily lighter – PostBulletin.com: Letters
Over the next few months, millions of Americans will turn their attention to the annual ritual of tax preparation. Each year brings new tax laws to consider, and 2013 is no exception. For middle-income earners, there’s both good news and not-so-good news in terms of new tax laws. In general, there are three key changes affecting middle-class taxpayers:
Northwestern MutualVoice: Three Key Changes Affecting Middle-Income Tax Filers for 2013 – Forbes
Creating an estate plan is a lot like getting into better shape. We all know we should do it, but most of us never make the first move because the task seems daunting.
You will have to look elsewhere for a diet and exercise plan. But if you need an estate plan, you can be sure that the seven easy steps outlined below will help you, with an assist from an attorney. (If you’re wondering whether you really need a lawyer’s help, read "The Trouble With DIY Estate Planning," below.)
How to Create a Bulletproof Estate Plan | Consumer Reports
For some, estate planning can be quite a confusing topic. The confusing nature of estate planning is often compounded by various estate planning myths that people hear from friends or family members who are not knowledgeable about estate planning law. Below are several of the more common estate planning myths, as well as the truth behind them.
Myth: If I Have a Will, My Estate Will Avoid Probate
Conversely, all property transferred via a will is guaranteed to go through probate. Through the process of probate, a court oversees the distribution of a person’s estate and ensures the decedent’s wishes, as outlined in the will, are carried out.
Myth: A Life Insurance Payout Will Not Trigger Estate Taxes
When the government determines the value of your estate for purposes of estate taxes, all of your assets are included. This necessarily includes the amount of any life insurance policy that will be paid out upon your death.
Myth: I’m Too Young for Estate Planning
Individuals should put estate plans in place upon reaching the age of 18 and continuously update the plan until death. Importantly, we never know when we will need an estate plan, and delaying planning can often have disastrous consequences.
A Revocable Trust Will Protect My Assets from Creditors
A revocable trust is an estate-planning tool that provides the owner with many benefits. However, it will not hide or otherwise protect assets from creditors or liability stemming from lawsuits. This is because a person remains in full control of any assets he or she puts into a revocable trust.
A bipartisan bill introduced in the Senate on November 5 that would simplify and standardize state income tax collection for employees who travel across state lines for temporary work assignments has received support from more than 250 organizations and business groups, including the American Institute of CPAs (AICPA).
The legislation, Mobile Workforce State Income Tax Simplification Act (S. 1645), which was introduced by US senators Sherrod Brown (D-OH) and John Thune (R-SD), would also help employers that have to file withholdings and reporting requirements. According to the two lawmakers, there are forty-one different state income tax reporting requirements, which employees and employers currently face, that vary based on length of stay, income earned, or both.
While some states require income tax filing for as little as one day of work in the state, the Mobile Workforce State Income Tax Simplification Act would establish a thirty-day threshold to help ensure that an equitable tax is paid to the state and local jurisdiction where the work is being performed.
AICPA Backs Income Tax Simplification Bill for Mobile Workforce | AccountingWEB
Donna received the letter canceling her insurance plan on Sept. 16. Her insurance company, LifeWise of Washington, told her that they’d identified a new plan for her. If she did nothing, she’d be covered.
A 56-year-old Seattle resident with a 57-year-old husband and 15-year-old daughter, Donna had been looking forward to the savings that the Affordable Care Act had to offer.
But that’s not what she found. Instead, she’d be paying an additional $300 a month for coverage. The letter made no mention of the health insurance marketplace that would soon open in Washington, where she could shop for competitive plans, and only an oblique reference to financial help that she might qualify for, if she made the effort to call and find out.
Special investigation: How insurers are hiding PPACA benefits from customers | LifeHealthPro