Congress originally devised the alternative minimum tax (AMT) rules to ensure that high-income individuals who take advantage of multiple tax breaks will owe something to Uncle Sam each year. In recent years, however, that concept has eroded. Now, even upper-middle-income taxpayers are likely to owe the AMT. Here’s an overview of how the AMT works and possible ways to minimize it. (more…)
With the ever-increasing cost of health insurance and medical care, you should be vigilant in finding ways to claim tax breaks related to health care. Unfortunately, that’s now harder than before because a change included in the Affordable Care Act (ACA) increased the income-based threshold for deducting itemized medical expenses. (more…)
We wanted to bring to your attention proposed regulations that could significantly impact an estate planning strategy used to transfer wealth between family members in a manner that, in the past, may have helped to minimize estate and/or gift tax.
Historically, taxpayers could reduce the value of their taxable estates by placing assets in partnerships, LLCs or closely held corporations and claiming lack of marketability and/or lack of control discounts. Either the taxpayer would gift interests in these entities to family members or family members would inherit interests in the entities. When valuing the entities for gift or estate purposes, discounts typically reduced the value of the ownership interests by 25% to 45%.
Thus, for example, placing $10 million worth of assets inside a closely held entity might reduce the value of the estate by $2.5 million to $4.5 million and, given the current 40% estate tax rate, reduce the estate tax payable by $1 million to $1.8 million.
The proposed regulations would severely limit or eliminate the availability of any discounts for closely held entities.
Fortunately, we have a short window of opportunity to take action before the new regulations would go into effect. The Treasury Department, for procedural reasons, cannot finalize the regulations until December 2016 at the earliest. In the interim, you can make gifts or sales to your family taking full advantage of the current law, which allows valuation adjustments.
Please contact your KWC advisor as soon as possible to discuss the impact of these regulations.
Charitable giving is on the rise. And the momentum is expected to continue, given the natural disasters and human tragedies that have happened in recent months. (more…)
You or someone you love may be ready for a retirement community living arrangement, which typically includes lifetime residential accommodations, meals, and some degree of medical services. These facilities can be quite expensive. The good news: Unexpected tax write-offs may help offset the cost. The tax-saving idea is that you may be able to deduct part of the retirement community’s one-time entrance fee and ongoing monthly fees as medical expenses on your Form 1040, regardless of your current health status. Since the fees we are talking about here can be quite large (see right-hand box), meaningful deductions may be possible despite the limitation on medical write-offs. You can only deduct medical expenses to the extent they exceed 10 percent of your adjusted gross income in 2016 (unchanged from 2015). Note: If you or your spouse is age 65 or older at year end, the new 10 percent-of-AGI threshold will not take effect until 2017. Until then, it remains 7.5 percent of AGI. (more…)
For one reason or another, you may need to take some money out of an IRA before reaching retirement. You can withdraw money from an IRA at any time and for any reason, but it’s important to keep in mind that most IRA withdrawals are at least partially taxable. In other words, you’ll owe regular income tax on the amount. In addition, the taxable portion of a withdrawal taken before age 59 1/2, which is called an “early withdrawal,” will be hit with a 10% penalty — unless you qualify for an exception. (more…)
The Internal Revenue Code allows some worthwhile tax breaks for transportation-related employee fringe benefits. They’re intended to persuade you to give up your gas-guzzling vehicle when commuting to work and instead “go green.” If your employer offers these tax-favored benefits, you should consider signing up. Here are the specifics. (more…)
Summer is the time for family vacations in the sun, sand and fresh air. It’s also a good time to plan for how your vacation home will be used for the second half of the year. (more…)
KWC is proud to announce the promotion of Howard Kramer to Principal with the firm.
“Howard is a welcome addition to our leadership team,” said Steve Travis, Managing Principal at KWC. “We look forward to his continued contributions to our clients’ financial success, as well as to the growth of the firm.” (more…)
KWC is proud to announce that the firm has been named as one of the winners of the 2016 When Work Works Award, sponsored by the Families and Work Institute (FWI) and the Society for Human Resource Management (SHRM). (more…)