Estate Taxes Archives - Professional Tax Resolution

Category Archives: Estate Taxes

Tax Breaks: Same-Sex Marriages will Receive Equality Across the Entire Nation

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Tax Breaks for Same Sex Marriages Across the Nation

Tax Breaks for Same Sex Marriages Across the Nation

A new ruling has declared tax breaks for same sex marriages since they will now receive equality across the entire nation.The Defense of Marriage Act (DOMA), enacted by Bill Clinton in 1996, was terminated this summer. This act, which allowed same-sex couples to receive the same tax benefits as heterosexual couples, was recently repealed by a 5-4 majority vote of the Supreme Court. While this vote may demonstrate a shift in the opinion of the American people, it also provides certain fiscal advantages for gay couples. Previously, only states that recognized gay marriage allowed same-sex couples to file federal tax returns as married couples. Now, however, gay partners are permitted by law to file federal returns as married couples in any state regardless of whether that state recognizes same-sex marriage.

The repealing of the Defense of Marriage Act raises questions as to how states will treat same-sex marriage. While some states may not acknowledge these unions, they are now forced to give gay couples the same federal tax benefits as straight couples. Same-sex couples are now able to file their federal returns, either jointly or separately, as married couples and are therefore entitled to the same tax benefits. However, if their state of residence does not recognize gay marriage, then the couple will be unable to file their state return as a married couple. Currently, only Washington D.C. and 13 states recognize gay marriage.

These new tax advantages extend beyond this year’s return. Same-sex couples can go all the way back to the year 2010 to receive their new-found benefits. To file one of these refund claims, taxpayers are instructed to use Form 1040. In addition the tax benefits already described, gay couples no longer have to pay federal income tax on the health insurance benefits received by one spouse when that spouse is claimed as a dependent on their partner’s plan.

Besides the obvious tax savings that are now available to gay couples, there are other small bonuses that come with the IRS acknowledgement of same-sex couples. Such couples can now transfer unlimited funds between one another whereas the allowable amount was previously restricted. In addition, they can now “gift split” which means that each spouse can gift up to $14,000 to a particular recipient for a total of $28,000. Lastly, gay couples are able to make use of “portability.” This enables widows and widowers to add their spouse’s unused estate tax exclusion to their exclusion.  However, in order to use the “portability” benefit, estate tax returns must be filed within nine months of a decedent’s death.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances

Gift and Estate Tax Changes Expected to Occur at the End of 2012

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The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act which was signed into law in 2010 increased the amounts of the estate, gift and generation skipping tax exemptions and, at the same time, lowered the tax rates for each of these taxes. However, unless Congress takes some action before the end of the year, the estate tax benefit benefits provided by this law will expire on December 31, 2012. The major provisions of the 2010 Tax Relief Act are outlined below together the changes that will take place on January 1, 2013 if Congress does not take further action.

Gift Tax

  • Current

The gift tax exemption is $13,000 per year for gifts made by any one person to any number of people. There is a lifetime gift tax exemption of $5,120,000 for gifts made above the $13,000 limit.

  • January 1, 2013

The gift tax exemption will remain at $13,000 per year (with a possible increase for inflation) for gifts made by any one person to any number of people. The lifetime gift tax exemption for gifts made above the $13,000 limit is scheduled to revert to $1,000,000.

Generation Skipping Tax

  • Current

The GST exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit.

  • January 1, 2013

The GST exemption is scheduled revert to $1,390,000 per year (with a possible increase for inflation) with a tax rate of 55% on amounts above the exemption limit.

Estate Tax

  • Current

The estate tax exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse is allowed.

  • January 1, 2013

The estate tax exemption is scheduled revert to $1,000,000 per year with a tax rate of 55% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse will no longer be allowed.

With January 1, 2103 fast approaching, taxpayers are anxious to see what, if any, action will be taken by Congress. If Congress does nothing, the exemptions for gift, generation skipping and estate taxes will revert to their 2009 levels and the tax rates for amounts above the designated exemption levels will increase to 55%. On the other hand, if Congress votes to extend the Tax Relief Act, the exemption limit for these taxes will remain at $5,120,00 with a possible inflation adjustment and the tax rate for amounts above the exemption limits will be held at the current 35%. Barring a full repeal of the estate tax, the third alternative would be the passage of some sort of compromise law that would place exemption limits and tax rates somewhere in the middle of the 2009 levels and those set by the Tax Relief Act of 2010.

If you owe back taxes due to a gift or inheritance, we can help you determine whether the assessed amounts are accurate based on past and current estate tax laws. Very often, the process of accurately interpreting the law and making use of tax benefits the law provides can result in a significant reduction in the tax amount owed. Following this analysis, our experienced tax settlement professionals will resolve any existing tax debt in the most effective way available. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.