March 15, 2010
Estate Tax Phaseout
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) phases out the federal estate tax through 2009 and 2010. In 2011 the estate tax will be restored unless Congress acts. The Main elements of the phaseout are a cap on the top estate tax rate and an increase in the exception amount. (Kaplan Financial Education,2009 Pocket Tables). Accountability and planning are important strategies to incorporate while planning for life events. Whether estate tax has a negative or positive impact is up to the action or non-action each individual takes. For certain it is one of the most significant events impacting life and loved ones.
When the estate tax is phased out, the unlimited step-up in basis provision for inherited property will disappear as well. Beginning in 2010, the regulations will allow an executor or a personal representative of an estate to adjust the cost basis of assets acquired by the estate's beneficiaries.
Each estate will generally be permitted to increase the basis of assets transferred up to $1.3 million. Plus, the basis of property transferred to a surviving spouse may be increased by an extra $3 million. Therefore, the total step-up for assets given to a surviving spouse will be no more than $4.3 million. After 2010, both the $1.3 million and $3 million figures will be adjusted for inflation.
This change in the step-up in basis provision could negatively affect the estates of farmers and small business owners who hold a significant amount of their wealth in the form of business assets. Recipients of highly-appreciated real estate in Utah would feel the hit as well when they sell and have to pay capital gains taxes.
Although the estate tax doesn't have a direct effect on the Salt Lake City home market, tax planning is an important consideration when buying a home in Salt Lake City, Draper homes for sale and Sandy, UT homes for sale.
When the estate tax is phased out, the unlimited step-up in basis provision for inherited property will disappear as well. Beginning in 2010, the regulations will allow an executor or a personal representative of an estate to adjust the cost basis of assets acquired by the estate's beneficiaries.
Each estate will generally be permitted to increase the basis of assets transferred up to $1.3 million. Plus, the basis of property transferred to a surviving spouse may be increased by an extra $3 million. Therefore, the total step-up for assets given to a surviving spouse will be no more than $4.3 million. After 2010, both the $1.3 million and $3 million figures will be adjusted for inflation.
This change in the step-up in basis provision could negatively affect the estates of farmers and small business owners who hold a significant amount of their wealth in the form of business assets. Recipients of highly-appreciated real estate in Utah would feel the hit as well when they sell and have to pay capital gains taxes.
Although the estate tax doesn't have a direct effect on the Salt Lake City home market, tax planning is an important consideration when buying a home in Salt Lake City, Draper homes for sale and Sandy, UT homes for sale.
