The best estate planners and lawyers would never have thought this day would come! They thought for sure Congress would not let this occur. But it has happened..........
UNDER THE CURRENT LAW- as of January 1 2010- There is NO FEDERAL ESTATE TAX!
Right now-Whether you are worth 1 million or 100 billion, if you die , all the money can go tax free to your heirs. This year, the saying "nothing in life is guaranteed but death and taxes " is totally wrong. You can die and keep all the money. But you better croak this year.
WOW! How did this happen?
During the Bush Administration Congress passed back in 2001 some tax laws that reduced the estate taxes over a period of years, culminating in the complete elimination of the estate tax in 2010.
Here is the Bad News
Under what is referred to as the Sunset Provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, without any intervention by Congress, the elimination of the Estate Taxes ends on December 31 this year. The estate taxes will be reinstated to what the taxes were back in 2002, with a mere 1 million dollar exemption. IN FACT LOTS OF TAX CHANGES WILL REVERT BACK TO WHAT EXISTED IN 2002. This includes an increase in the capital gains rate and increases in the tax rates for all individuals. That means, starting in 2011, most of the wealth you have built up over the years will be going back to the U.S.Treasury. So if you love your family and want to leave them some money and plan on departing this earth- you probably have the rest of the year to enjoy yourself. After that - the party is over.
Congress Will Probably Do Nothing this year to Change Things- and Here is Why
The tax laws passed in 2001 were passed by a Republican Congress. Our current Congress is Democratic.. There is no political incentive for this Congress to change the tax laws now. They are going to wait until everyone screams and complains about how high taxes are in 2011. And the Democrats will be able to blame it all on the Republicans and the past Administration. The Democratic Congress backed by the President, will start to push for lowering your taxes by the fall of 2011- just in time to use these changes to secure some votes in the upcoming elections.
Sunday, January 10, 2010
Wednesday, December 3, 2008
How A CPA Would Bailout the Auto Industry!!
Forget about writing any checks. I can bailout the auto industry without the government having to write a check.
This is how you do it: Eliminate temporarily for six months the "Listed Property" rules in the Tax Code for domestically manufactured autos . By doing this- every automobile on the dealer lots will be sold instantaneously.
Why? Because the tax savings on these automobiles will be so great that it will allow the purchasers to bankrole the acquisition of autos using tax dollars saved.
For those of you who have no idea what I am talking about- here is the explanation:
During the Ronald Reagan era, to stimulate the economy accelerated depreciation rules were introduced, including the concept of section 179- which is the complete writeoff of an asset within a one year period, even if you acquired the asset by borrowing the money. However, in an effort to prevent abuse of these rules, automobiles were severely limited from these accelerated writeoff benefits. Basically all automobiles are subject to the "Listed Property" rules which severely limits the depreciation deduction a business can take annually on an automobile that has been purchased. That is why so many businesses "lease vs buy" an auto. It does not pay economically to purchase an auto.
With the new Stimulus Act earlier this year the first-year limit on depreciation for passenger automobiles was increased by $8,000. For example if you purchased a passenger auto for over $45,000 (passenger auto is defined as less than 6,000 pounds in gross vehicle weight) during 2008 and used it 100% for business you would be able to expense $10,960 in the first year.
In the 36% federal bracket, this could save you approx $4,000. THIS IS GOOD BUT NOT EARTHSHAKING..
Now imagine if that same taxpayer could writeoff completely the $45,000 in one year.
That would save him over $16,000!!! That is enough savings to cover a full year of payments with no downpayments... NOW THAT IS IMPRESSIVE AND VERY STIMULATING
Want to Stimulate the Econony- TRY THAT>>>
WHAT DO YOU THINK?? Let me know...
This is how you do it: Eliminate temporarily for six months the "Listed Property" rules in the Tax Code for domestically manufactured autos . By doing this- every automobile on the dealer lots will be sold instantaneously.
Why? Because the tax savings on these automobiles will be so great that it will allow the purchasers to bankrole the acquisition of autos using tax dollars saved.
For those of you who have no idea what I am talking about- here is the explanation:
During the Ronald Reagan era, to stimulate the economy accelerated depreciation rules were introduced, including the concept of section 179- which is the complete writeoff of an asset within a one year period, even if you acquired the asset by borrowing the money. However, in an effort to prevent abuse of these rules, automobiles were severely limited from these accelerated writeoff benefits. Basically all automobiles are subject to the "Listed Property" rules which severely limits the depreciation deduction a business can take annually on an automobile that has been purchased. That is why so many businesses "lease vs buy" an auto. It does not pay economically to purchase an auto.
With the new Stimulus Act earlier this year the first-year limit on depreciation for passenger automobiles was increased by $8,000. For example if you purchased a passenger auto for over $45,000 (passenger auto is defined as less than 6,000 pounds in gross vehicle weight) during 2008 and used it 100% for business you would be able to expense $10,960 in the first year.
In the 36% federal bracket, this could save you approx $4,000. THIS IS GOOD BUT NOT EARTHSHAKING..
Now imagine if that same taxpayer could writeoff completely the $45,000 in one year.
That would save him over $16,000!!! That is enough savings to cover a full year of payments with no downpayments... NOW THAT IS IMPRESSIVE AND VERY STIMULATING
Want to Stimulate the Econony- TRY THAT>>>
WHAT DO YOU THINK?? Let me know...
Saturday, October 18, 2008
Tax- Free Distributions from IRAs & 401ks should be Allowed so Homeowners can Reduce or Eliminate Mortgage Debt on Their Primary Residence
I keep hearing from the candidates that it's the middle class that is the economic life blood of this country. So isn't it about time the government started asking the professionals who deal with small businesses , the professionals that understand the impact any new tax laws will have on the middle class -What would really make a difference to this economy-
CPAs like myself understand what has to be done-We are the ones who deal with businesses everyday and understand what is needed.
The 750 Billion Dollar Bailout does nothing to immediately help homeowners make their mortgage payments. It also does nothing to create discretionary spending- which is what this country will need to stimulate the economy again and get it out of a recession. YES- we are in a recession and you don't need a 900 point drop in the Dow Jones to comfirm that. Just look around at empty storefronts in your town. If individuals are burdened with debt payments, they can't go out and spend. If they can't go out and spend- businesses close their doors.
Do you really believe that when the Federal government gives the banking system additional capital that the banks are going to automatically start loaning out money to businesses or make it easier for individuals to buy a home? Not a chance. This may save us from a catastrophic depression but it will not ease up credit overnight on Main Street. It will take years for the pendulum to swing again in the direction where banks will be giving small businesses credit lines based upon the credit worthiness of the individual owners of the business.
The Bush Economic stimulus check was a total waste of money and a really dumb idea- TWICE dumb. It was like a pimple on an elephant's butt. What individuals need to do is eliminate debt with dollars they don't need now. With dollars they technically don't even have access to now.
MY PROPOSAL IS: ELIMINATE THE TAX TEMPORARILY ON TRUSTEE TO TRUSTEE DISTRIBUTIONS FROM IRAS, 401ks AND OTHER QUALIFIED PLANS WHEN THE MONEY IS USED TO REDUCE OR ELIMINATE DEBT ON PRIMARY RESIDENCES THAT WAS IN PLACE AS OF DECEMBER 31, 2007.
Yes- not just eliminate the penalty for early distribution, eliminate the entire tax consequence. The theory is that many 401ks and IRAs are down in value as much as 40% anyway. If you could go back in time a year ago, you could of taken out your IRA, paid a 10% penalty if you were under 59 1/2 and pay the tax and use the remainder to pay down your debt. That penalty and tax burden could have been more than 50% in some states. So by allowing individuals to reduce their debt tax free- it 's like the government gave them back all the money they lost in the market over this last year.
Most important is that by reducing the debt of these homeowners- banks will be in better shape (loans will be reduced in proportion to restated real estate values) and homeowners as consumers will have discretionary dollars available again since their debt burden has been reduced or eliminated. Improved cash flow now equates to discretionary dollars.
Some would argue that we are stealing the future of America's retirement. Nonsense - this is a totally elective gift. Essentially- the government is partnering with individuals to reduce their debt. Right now- with the market down as much as it is - most baby boomers won't be able to retire anyway.
Others will argue that this will put additional pressure on the equity markets. This may be true for a very brief period- but when stocks get low enough- buyers and new money will come out of the woodwork and snatch up the bargains.
In Summary- The government and the consumer have both been living on a deficit budget. This needs to change. The middle class is sitting on a hidden asset that if they could tap into - would allow them to reduce or in fact eliminate debt in many cases. Because credit markets will remain tight for many years to come , individuals must learn to live within their budget constraints. Tax-free distributions from retirement plans could be the shot in the arm this economy needs to jump start this economy again under these new economic rules.
LIKE THIS IDEA? HAVE A BETTER IDEA?
LET ME AND EVERYONE KNOW WHAT YOU WOULD DO TO FIX THIS MESS.
POST YOUR COMMENTS BELOW- CLICK ON "COMMENTS"
CPAs like myself understand what has to be done-We are the ones who deal with businesses everyday and understand what is needed.
The 750 Billion Dollar Bailout does nothing to immediately help homeowners make their mortgage payments. It also does nothing to create discretionary spending- which is what this country will need to stimulate the economy again and get it out of a recession. YES- we are in a recession and you don't need a 900 point drop in the Dow Jones to comfirm that. Just look around at empty storefronts in your town. If individuals are burdened with debt payments, they can't go out and spend. If they can't go out and spend- businesses close their doors.
Do you really believe that when the Federal government gives the banking system additional capital that the banks are going to automatically start loaning out money to businesses or make it easier for individuals to buy a home? Not a chance. This may save us from a catastrophic depression but it will not ease up credit overnight on Main Street. It will take years for the pendulum to swing again in the direction where banks will be giving small businesses credit lines based upon the credit worthiness of the individual owners of the business.
The Bush Economic stimulus check was a total waste of money and a really dumb idea- TWICE dumb. It was like a pimple on an elephant's butt. What individuals need to do is eliminate debt with dollars they don't need now. With dollars they technically don't even have access to now.
MY PROPOSAL IS: ELIMINATE THE TAX TEMPORARILY ON TRUSTEE TO TRUSTEE DISTRIBUTIONS FROM IRAS, 401ks AND OTHER QUALIFIED PLANS WHEN THE MONEY IS USED TO REDUCE OR ELIMINATE DEBT ON PRIMARY RESIDENCES THAT WAS IN PLACE AS OF DECEMBER 31, 2007.
Yes- not just eliminate the penalty for early distribution, eliminate the entire tax consequence. The theory is that many 401ks and IRAs are down in value as much as 40% anyway. If you could go back in time a year ago, you could of taken out your IRA, paid a 10% penalty if you were under 59 1/2 and pay the tax and use the remainder to pay down your debt. That penalty and tax burden could have been more than 50% in some states. So by allowing individuals to reduce their debt tax free- it 's like the government gave them back all the money they lost in the market over this last year.
Most important is that by reducing the debt of these homeowners- banks will be in better shape (loans will be reduced in proportion to restated real estate values) and homeowners as consumers will have discretionary dollars available again since their debt burden has been reduced or eliminated. Improved cash flow now equates to discretionary dollars.
Some would argue that we are stealing the future of America's retirement. Nonsense - this is a totally elective gift. Essentially- the government is partnering with individuals to reduce their debt. Right now- with the market down as much as it is - most baby boomers won't be able to retire anyway.
Others will argue that this will put additional pressure on the equity markets. This may be true for a very brief period- but when stocks get low enough- buyers and new money will come out of the woodwork and snatch up the bargains.
In Summary- The government and the consumer have both been living on a deficit budget. This needs to change. The middle class is sitting on a hidden asset that if they could tap into - would allow them to reduce or in fact eliminate debt in many cases. Because credit markets will remain tight for many years to come , individuals must learn to live within their budget constraints. Tax-free distributions from retirement plans could be the shot in the arm this economy needs to jump start this economy again under these new economic rules.
LIKE THIS IDEA? HAVE A BETTER IDEA?
LET ME AND EVERYONE KNOW WHAT YOU WOULD DO TO FIX THIS MESS.
POST YOUR COMMENTS BELOW- CLICK ON "COMMENTS"
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