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Review your estate assets and estate planning to protect
your intentions towards your loved ones and avoid the
wealth destroying effects of the decrease in the estate
exemption and the increase in the estate tax rates.
over $3,500,000 per individual. Additionally there are proposals
to severely restrict or curtail popular estate planning tools
such as grantor retained annuity trusts (GRATS).
Traditional tax planning in the face of rising tax rates and
curtailment of deductions calls for accelerating income into
2010 and deferring deductions into a higher tax-rate year (e.g.
2011). However, this year has several complicating factors,
the first being that the alternative minimum tax (AMT) has
not yet been “set” for 2010. AMT is a parallel calculation of
income tax, whereby certain items, such as the deduction for
state and local income taxes, are disallowed or limited but a
base amount of income is exempted. It is estimated that up
to 40% of all taxpayers will be subject to AMT if Congress
doesn’t act. Historically Congress has “fixed” or “patched”
this exemption amount which is not indexed for inflation,
thereby restoring the value of itemized deductions.
A second complicating factor is legislative uncertainty,
demonstrated above with the AMT but applicable to all of the
scheduled tax increases noted in this article. Congress has the
power to change the tax law between now and December 31st
and can also change the 2010 tax laws retroactively in 2011,
further complicating planning.
While Congress is widely expected to allow at least the top
two income tax rates and the capital gains tax to increase, failing
to plan and act before year-end will cost taxpayers significant
dollars. Where possible, accelerate both earnings and deductions
into 2010. Closely held businesses such as C corporations,
or S corporations with C corporation earnings, can generate tax
savings by paying employees’ bonuses and qualified dividends
to shareholders by December 31st. For example: a $100,000 dividend
paid in December 2010 could save $24,600 in federal taxes
over the same dividend paid January 1, 2011. A $100,000 bonus
earned and paid in December 2010 could save $4,600 in federal
taxes over the same bonus paid next January.
Despite the sluggish economy of the past two years, many individuals
still hold substantially appreciated long-term or legacy
The total solution for your financing needs.
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From ensuring you have the inventory you need to stay
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your customers – M&T is here for the Maryland Automobile
Dealers Association. We have a 50-year history of providing
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Our commitment is continued today with a team of skilled
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Floor Plan lending
Donna M. Kochanski • 410-244-4962
dkochanski@mtb.com
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