MKA Executive Planners Blog

The Obama Administration recently released its federal budget for fiscal year 2016 proposing several tax law changes, which, if enacted, could significantly increase your federal income, capital gains and/or estate tax exposure. Although Congress may not take action on these proposals, they may provide some insight into potential areas of consideration for future tax reform legislation. Some of the more notable proposals include:

• Increasing the top tax rate on long-term capital gains and qualified dividends from 20% to 24.2%;
• Making gifts and bequests of appreciated assets “realization events” and imposing capital gains tax on the appreciation in the year of the transfer (on top of any gift or estate tax due);
• Imposing a new 30% “Fair Share Tax” on individuals with $1 million or more of adjusted gross income
• Limiting the value of certain income tax expenditures and tax deductions (e.g., itemized deductions, employer-paid health insurance, contributions to certain retirement plans and IRAs, etc.) for taxpayers in the 33% or higher income tax brackets;
• Reinstating higher federal estate and gift tax rates (from 40% to 45%) and lower exemptions (from $5.43 million for both to $3.5 million for estates and $1 million for gifts); and
• Increasing the estate and gift tax costs of implementing common wealth transfer planning techniques, including GRATs, sales to grantor trusts, and multi-generational “dynasty” trusts.

Again, the budget only represents the Administration’s “wish list” for future tax legislation.  That said, you may wish to review your current estate and income tax planning and consider what options may better serve your overall financial planning needs. We can assist you in this process and help you to lay the groundwork for planning in the event any of these tax proposals becomes a reality. 

Please contact us if you have any questions or to schedule a time to discuss these developments and their potential impact.

For further information, contact John Yagjian, JD, jyagjian@mkaplanners.com or Barry Koslow, JD, bkoslow@mkaplanners.com .

Securities offered through Advisory Group Equity Services, Ltd., Member FINRA/SIPC.  444 Washington Street, Woburn, MA 01801 (781) 933-6100. 

This article should not be considered as providing accounting, business, financial, investment, legal, tax, or other professional advice or services.  It is not a substitute for such professional advice or services, nor should it be used as the basis for any decisions or actions that may affect your business or you personally.  This should only be one part of your research.  You should seek authoritative guidance from a qualified accountant or attorney before taking any action.

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