Obama’s Revenue Proposals for 2013

March 14, 2012

The times they are a-changing.  Along with other changes in the U.S. economic, social and political scene, are new tax proposals.  Here is a partial list of recently submitted proposals by the Obama administration:

These proposals are intended (if adopted by Congress) to become effective as of 1 January 2013.

•   Reinstate limitation on itemized deductions for high-income taxpayers.  If adjusted gross income (AGI) exceeds $250,000 (joint filers), $225,000 for head of household  filers, $200,000 for single persons and $100,000 for marrieds filing sepatately, the total of itemized deduction is reduced by 3% of the excess of those deductions over those amount.  

•   Reinstate phase-out of personal exemptions for high-income taxpayers.  

•   Upper income brackets raised. Top rate would become 39.6%

•   “Qualified dividends” as ordinary income for portion of those dividends that would fall into the new 36% or 39.6% income tax brackets.

•   Raise capital gain rates to 20% on the portion of capital gain income that would otherwise be taxable in the new 36% or 39.6% income tax brackets.

•   There would be modifications in the minimum required distributions of IRA and other retirement plans.

•   Estate, gift, and generation-skipping transfer taxes would be rolled back to 2009 levels:

          –  Maximum estate, gift and generation-skipping transfer (GST) tax rate would be 45%.

          – The estate tax and GST tax exemptions would each be $3.5 million,

          – The gift tax exemption would be $1 million.

          – The “portability” of unused estate and gift tax exemptions between spouses would continue.

•   Require consistency regarding basis for transfer tax and income tax purposes – An executor would be required to report the basis of property transferred at death and a donor would be required to report the basis of property transferred by gift. The recipient in either case would be required to use that basis.

•   Changes in grantor trust taxation.  These will be elaborated in a later Blog entry if they become law.

Discussion: Although dependent in large part on the outcome of the next presidential and congressional elections, it would be wise for anyone with a large estate to take advantage of the high ($5,000,000) estate tax exemption by making gifts to intended beneficiaries (e.g,, children) before 31 December 2012. 

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Obama’s Revenue Proposals for 2013

March 14, 2012

The times they are a-changing.  Along with other changes in the U.S. economic, social and political scene, are new tax proposals.  Here is a partial list of recently submitted proposals by the Obama administration:

These proposals are intended (if adopted by Congress) to become effective as of 1 January 2013.

•   Reinstate limitation on itemized deductions for high-income taxpayers.  If adjusted gross income (AGI) exceeds $250,000 (joint filers), $225,000 for head of household  filers, $200,000 for single persons and $100,000 for marrieds filing sepatately, the total of itemized deduction is reduced by 3% of the excess of those deductions over those amount.  

•   Reinstate phase-out of personal exemptions for high-income taxpayers.  

•   Upper income brackets raised. Top rate would become 39.6%

•   “Qualified dividends” as ordinary income for portion of those dividends that would fall into the new 36% or 39.6% income tax brackets.

•   Raise capital gain rates to 20% on the portion of capital gain income that would otherwise be taxable in the new 36% or 39.6% income tax brackets.

•   There would be modifications in the minimum required distributions of IRA and other retirement plans.

•   Estate, gift, and generation-skipping transfer taxes would be rolled back to 2009 levels:

          –  Maximum estate, gift and generation-skipping transfer (GST) tax rate would be 45%.

          – The estate tax and GST tax exemptions would each be $3.5 million,

          – The gift tax exemption would be $1 million.

          – The “portability” of unused estate and gift tax exemptions between spouses would continue.

•   Require consistency regarding basis for transfer tax and income tax purposes – An executor would be required to report the basis of property transferred at death and a donor would be required to report the basis of property transferred by gift. The recipient in either case would be required to use that basis.

•   Changes in grantor trust taxation.  These will be elaborated in a later Blog entry if they become law.

Discussion: Although dependent in large part on the outcome of the next presidential and congressional elections, it would be wise for anyone with a large estate to take advantage of the high ($5,000,000) estate tax exemption by making gifts to intended beneficiaries (e.g,, children) before 31 December 2012.