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Bill Laskin bill@pgcalc.com Jeff Lydenberg jeff@pgcalc.com 617-497-4997

Gift Planning and the New Tax Law. Bill Laskin bill@pgcalc.com Jeff Lydenberg jeff@pgcalc.com 617-497-4997. Introduction . The Affordable Care Act of 2010 American Taxpayer Relief Act of 2012 It could have been worse Certainty, for now Importance of charitable deduction?. 2.

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Bill Laskin bill@pgcalc.com Jeff Lydenberg jeff@pgcalc.com 617-497-4997

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  1. Gift Planning and the New Tax Law Bill Laskin bill@pgcalc.com Jeff Lydenberg jeff@pgcalc.com 617-497-4997
  2. Introduction The Affordable Care Act of 2010 American Taxpayer Relief Act of 2012 It could have been worse Certainty, for now Importance of charitable deduction? Charitable Giving and the New Tax Law 2
  3. Income Taxes Federal Rates for Income Taxes Capital Gains and Qualified Dividends Medicare Surtaxes Charitable Giving and the New Tax Law 3
  4. Federal Rates for Income Taxes Increased from 35% to 39.6% for income over specified thresholds below Charitable Giving and the New Tax Law 4
  5. Federal Rates: Married Filing Jointly Charitable Giving and the New Tax Law 5
  6. Capital Gains and Qualified Dividends Increased from 15% to 20% for income over specified thresholds below Charitable Giving and the New Tax Law 6
  7. Capital Gains and Qualified Dividends Tax Schedule: MFJ Charitable Giving and the New Tax Law 7
  8. 3.8% Medicare Surtax Compare to Income Tax Rates Charitable Giving and the New Tax Law 8
  9. Charitable IRA Rollover: Background Extended again by ATRA: expires 12/31/13 Can fulfill minimum distribution requirements from an IRA Can fulfill a pledge to charity Easy to do One step: IRA administrator sends check to charity Don’t report as income and no deduction Charitable Giving and the New Tax Law 9
  10. Charitable IRA Rollover: Requirements Donor is 70½ or older Traditional IRA or Roth IRA Total of all IRA rollover gifts $100,000 or less Public charities only Nothing in return (outright gifts only) Documented Charitable Giving and the New Tax Law 10
  11. Deduction Reductions Pease limitation Reduce itemized deductions by 3% of excess over applicable AGI threshold Reduction cannot exceed 80% of itemized deductions Charitable Giving and the New Tax Law 11
  12. Pease Limitation Charitable Giving and the New Tax Law 12
  13. Pease Limitation: Example Mr. and Mrs. Smith file a joint tax return Joint AGI of $500,000 Itemized deductions $20,000 real estate taxes $10,000 mortgage interest $50,000 charitable deductions $80,000 total deductions Charitable Giving and the New Tax Law 13
  14. Pease Limitation: Example Itemized deductions will be reduced to $74,000: $500,000 - $300,000 = $200,000 Amount subject to 3% deduction reduction $200,000 x 3% = $6,000 Amount of deduction reduction $80,000 - $6,000 = $74,000 Itemized deductions after reduction But … reduction is absorbed by mortgage interest and real estate taxes Charitable Giving and the New Tax Law 14
  15. Gift, Estate, and GST Exemptions Exemptions were due to drop to $1,000,000 Instead, now set at $5,250,000 with indexing for inflation Portability rules can double exemption between spouses to $10.5 million Charitable Giving and the New Tax Law 15
  16. Portability Exemption: Example Karen McNeil dies in 2013 Made $1 million in lifetime taxable gifts Leaves $10 million estate to husband Jerome No estate tax is due at her death Charitable Giving and the New Tax Law 16
  17. Gift, Estate, and GST Rates Charitable Giving and the New Tax Law 17
  18. Annual Gift Tax Exclusion $13,000/recipient in 2012 $14,000/recipient in 2013 Increase is an inflation adjustment; not related to ATRA With gift-splitting, spouses can double exclusion to $28,000 Charitable Giving and the New Tax Law 18
  19. Conclusion On balance, ATRA is favorable IRA Rollover great opportunity for 2013 Higher top income tax and estate tax brackets will affect relatively few donors Temporarily permanent rather than permanently temporary? Momentum for tax reform? Charitable Giving and the New Tax Law 19
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