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May 2013
10
May 10, 2013

Planning Ahead: Highlights of the American Taxpayer Relief Act


Estate, Gift and GST Taxes
 
  • For individuals dying and gifts made after 2012, there is a $5 million exemption (adjusted for inflation) for estate, gift and generation-skipping transfer taxes. This inflation-adjusted exemption  is $5.25 million for 2013.  The top estate, gift and GST rate is permanently increased from 35% to 40%.
Portability
 
  • The Act continues the law that permits a surviving spouse to claim any unused estate and gift tax exemption of a deceased spouse on the surviving spouse’s estate tax return, often referred to “portability.” Portability prevents a loss of exemption when the deceased spouse does not have enough assets to fully use his or her estate and gift tax exemption, and allows the surviving spouse to benefit from the balance of unused exemption.
Charitable Donations from IRAs
 
  • The Act extends the rules that allow tax-free distributions from IRAs to public charities by individuals age 70 1/2 and older, up to a maximum of $100,000 per taxpayer each year.
Conservation Easements

  • The charitable deduction a landowner can take for donating a qualified conservation easement for 2013 has increased from 30% to 50% of adjusted gross income (AGI). Qualifying farmers and ranchers can take a charitable deduction of up to 100% of their AGI for 2013. The law also increases the number of years over which a landowner can carry over amounts that were not deductible in the year of contribution due to the charitable deduction limitation from 5 to 15 years.
Capital Gains
 
  • Beginning this year, dividends and capital gains are taxed at 20% (up from 15%) for individuals making at least $400,000 ($450,000 for joint returns).
Income Tax Rates
 
  • For 2013, the income tax rate increases to 39.6% (up from 35%) for individuals making more than $400,000 a year ($450,000 for joint filers; $425,000 for heads of household).
Alternative Minimum Tax
 
  • The higher exemption amounts for the alternative minimum tax (the AMT patch) are now permanent. For years after 2011, the AMT exemption amounts jump to $50,600 for unmarried taxpayers, $78,750 for joint filers and $39,375 for married persons filing separately. These amounts are indexed for inflation. This permanent fix eliminates the need for an annual AMT patch and results in an estimated 30 million taxpayers escaping the AMT.
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