Estate tax repeal = huge tax increase on the middle class (tax return, money)
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The Republican proposal to repeal the estate tax will actually result in much higher taxes for most Americans. Under the current system, when someone dies with an estate worth less than a certain amount ($11m in 2017), no estate tax is owed but the basis in their holdings increases to fair market value. However, in years with no estate tax, the assets will transfer to heirs at carryover basis.
What does this mean? If your dad dies and leaves you $300k in stock that he bought for $25k 30 years ago, you pay ZERO tax under the current system (since it is less than the $11m cutoff) but your basis in the shares becomes $300k. You can sell the stock tomorrow and recognize zero gain, and use those funds however you like.
However, if your dad dies in a year when there is no estate tax (i.e. 2010, and now maybe 2018 and beyond), there is no transfer tax but now you get those $300k in shares with a basis of $25k, meaning if you were to sell tomorrow, you would owe tax on a gain of $275k. That's a $96k tax!! It gets much, much worse if you're talking about the family house, farm, small or small business.
The repeal of the estate tax only helps people who have significantly more than the cutoff- you need to have ~$20m+ before you break even and more than that to actually get a positive result from the repeal.
It's a strange outcome from a repeal of a tax, but that's just how it works under our system. I actually don't know how I feel about this, and I'm a Republican (usually anti-death tax). But it's certainly not a tax "cut" for most Americans.
2010 rules with estate tax repeal allowed a minimum of 1.3 million in stepped-up basis, 3 mil more for surviving spouses. New rules should allow higher amount, it won't affect most non-wealthy families.
I'm not going to disclose any of my clients personal information, but the article that was posted paints a picture that doesn't exist in most small family farming and ranching operations. The fact that even 50 small farms are going to be destroyed by the estate tax, is 50 too many.
To answer the first question about property taxes, in Montana, agricultural farm land that is personally owned, does indeed get a reduced property tax rate. This is the reason that the families want to keep the land personally owned. The second they incorporate, or transfer ownership to a partnership or LLC, they loose some of those savings, and are subject to the business property tax, which also taxes equipment, as well as real estate.
These clients are land rich, cash poor. They own tens of thousands of acres, with out buildings, and equipment, but little in cash. Most of their money is in the cattle on the land. Their home is on the ranch. They may own a couple of pickups. They draw a salary of about 100K each, and put everything else back in. They don't have investment portfolio's to use to pay the estate tax. So tell me, how is this family supposed to pay the estate taxes when grandpa dies? Sell all of the cattle to pay the bill? Most wind up selling off chunks of land to pay the bill.
Why does the government have the right to tax income, after it has already been taxed, just because someone dies. Where is all of this hatred of wealthy people coming from?
Why should I care about farmers? Clearly the people removing the state income tax deduction don't care about me.
Will you be inheriting more than 20 million dollars? If not, estate tax being repealed will result in more taxes than the current system. Congratulations for not understanding that.
Will you be inheriting more than 20 million dollars? If not, estate tax being repealed will result in more taxes than the current system. Congratulations for not understanding that.
Who Cares, the estate tax sucks and it should be repealed.
and kill the death tax as well.
Gift tax is bizarre. Give something away and pay taxes on the gift you gave.
You have it backwards. The recipient can only collect so much free money before they have to declare it as income and pay income tax on it. It's not earned income, so they are exempt from FICA forever. The giver never pays any tax, but can exempt a certain amount every year.
You have it backwards. The recipient can only collect so much free money before they have to declare it as income and pay income tax on it. It's not earned income, so they are exempt from FICA forever. The giver never pays any tax, but can exempt a certain amount every year.
Recipient never pays gift tax as far as I know. IRS seems to agree.
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