There have been many recent proposed changes to tax laws and regulations. Planning ahead of these changes is crucial. President Obama’s proposed 2016 budget includes changes that would eliminate many strategies that could save significant taxes. These changes include:
- Elimination of favorable tax treatment for Grantor Retained Annuity Trusts (GRATs) which are used to transfer family assets with minimized tax consequences;
- Elimination of discounted gifting of interests in family corporations, family limited partnerships (FLPs) and limited liability companies (LLCs);
- Limitation on annual gifts excluded from the gift tax;
- Reverting to a prior smaller exemption from estate tax (specifically, to 2009 when the estate tax exception was only $3.5 million per person and lifetime gift exemptions were $1 million per person) and a return to the top estate tax rate of 45%;
- Eliminating the “step up” in basis for appreciated assets at death;
- Capital gains tax rate increase from 23.8% to 28%;
- Eliminating the home mortgage interest deduction.
While certain of the above proposals are unlikely to be approved by Congress, note that Congress frequently changes the rules. Recall, for example, the rush to estate planning at the end of 2012, when the exemption from estate tax was set to expire. In addition, Congress in recent years approved increases in capital gains tax rates, dividend tax rates and also implemented the 3.8% investment tax.
There are strategies that can be implemented before these proposed changes are promulgated by the government. We can assist you in best anticipating the proposed changes and developing strategies to overcome the tax increases.
For additional information on tax planning, please see our various articles here.
Contact us for a confidential consultation regarding tax planning.