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Hamilton Plans Newsletters

Summer 2013

American Taxpayer Relief Act

Prepared as a service to the Hamilton family, the following are highlights of the American Taxpayer Relief  Act of 2012 “ATRA”:

  • Tax rates remain at 2001 and 2003 levels (10%, 15%, 25%, 28%, 33% and 35%) for individuals with taxable income up to $400,000 ($450,000 for joint filers). Those above the threshold amounts will be taxed at 39.6%.
  • The long-term capital gain and qualified dividend income tax rate for individuals and joint filers in the 39.6% bracket increases to 20%. For others it remains at 15%.
  • The maximum estate and gift tax rate increases from 35% to 40% while the current estate, gift and generation-skipping tax exemptions of $5 million (indexed for inflation) are preserved. For 2013, it is $5.25 million per person.
  • Reinstatement of the “Pease” itemized deduction limitation and personal exemption phase-out for individuals with adjusted gross income over $250,000 ($300,000 for joint filers). This provision will not impact most charitable contributions.
  • A permanent increase in the alternative minimum tax (“AMT”) exemption amount (indexed for inflation).
  • The IRA charitable rollover is renewed for 2012 and 2013. Donors age 70½ or older are eligible to make gifts to public charities of up to $100,000 from their IRAs.
     

What does this mean for personal and philanthropic planning?
 

  • Now “permanent” estate and generation-­skipping tax rules present an excellent opportunity to re-visit existing, or make new, estate plans.
  • Gifts of appreciated securities held long-term are attractive for all taxpayers, especially those subject to the higher capital gain tax rate and the 3.8% Affordable Care Act Medicare surtax on investment income.
  • Charitable lead annuity trusts and gifts of a remainder interest in a primary residence are favorable in the current low interest environment.
  • Charitable gift annuities funded with cash provide donors with large tax-free payments.
  • Donors age 70½ or older who do not itemize may find the IRA charitable rollover appealing.
     

A full description of ATRA prepared by Hamilton’s legal counsel can be viewed at Private Clients Alert.