Proposed tax changes for 2011

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There’s a lot of talk about the New Tax Relief Act of 2010.
At the time of this writing, it isn’t law, and with our current political logjam, there is likely to be a fair bit of change between now and then.
We thought, however, that our clients would like to hear some of the elements that are of most direct interest to their welfare, and to the health of their estate.
Once again.. this is a preview of what is currently under discussion. It is NOT law, and should not be looked at as political, legal, or financial advice. This is only a brief look at some of the currently debated act, as it impacts our senior clientele.

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Proposed tax changes for 2011

  1. 1. Proposed Tax changes for 2011<br />Boston Elder Law Attorneys<br />Specializing in Medicaid Planning<br />Cohen & Oalican, LLC<br />617-263-1035- Boston<br />508-821-5599 – Raynham<br />978-749-0008 - Andover<br />
  2. 2. Proposed Tax Changes for 2011<br />There’s a lot of talk about the New Tax Relief Act of 2010.  <br />At the time of this writing, it isn’t law, and with our current political logjam, there is likely to be a fair bit of change between now and then.  <br />We thought, however, that our clients would like to hear some of the elements that are of most direct interest to their welfare, and to the health of their estate.<br />
  3. 3. Proposed Tax Changes for 2011<br />Once again.. this is a preview of what is currently under discussion.<br />It is NOT law, and should not be looked at as political, legal, or financial advice.<br />This is only  a brief look at some of the currently debated act, as it impacts our senior clientele.<br />
  4. 4. Proposed Tax Changes for 2011<br />Reductions in Individual Income Tax Rates <br />Under contemplation is to temporarily extend the 10% bracket. The 10% individual income tax bracket expires at the end of 2010, and this impacts a great deal of our elder law clients. If nothing happens, the lowest tax rate will be 15%. This proposal extends the 10% individual income tax bracket for an additional two years, through 2012.<br />
  5. 5. Proposed Tax changes for 2011<br />Capital Gains and Dividends.<br />Many of our clients are reliant on their investments.  Here is what is under contemplation regarding Capital Gains and Dividends.<br />Under discussion it to temporarily extend the current capital gains and dividend rates. Currently  capital gains and dividend rates for individuals below the 25% bracket is equal to zero percent. For those in the 25% bracket and above, the capital gains and dividend rates are 15%. If this portion of the act does not happen, capital gains taxes become 10% and 20% respectively.  Dividends will be subject to the ordinary income rates. This proposal extends the current capital gains and dividends rates for all taxpayers for an additional two years, through 2012.<br />
  6. 6. Proposed Tax Changes for 2011<br />Dependent Care Credit<br />Many of our clients have adult dependent children, or are themselves dependents of their children.  The impact of the dependent care credit is of a direct concern to our elder and disabled clients.   Under discussion is to (temporarily) extend the expanded dependent care credit.  The dependent care credit allows a taxpayer a credit for an applicable percentage of child care expenses for children under 13 and disabled dependents.   The current eligible expenses are $3,000 for one dependent, and $6,000 for two or more dependents.  These are proposed to be extended through 2012.   If the credit falls back to previous rates, it will be only $2,400 for one dependent and $4,800 for two or more dependents<br />
  7. 7. Proposed Tax Changes for 2011<br />Estate Tax<br />Top on the list for most of our elder law clients, is preserving their estate. <br />Below are the changes, verbatim, on what we may expect to see in tax relief in Estate Taxes.<br />
  8. 8. Proposed Tax Changes for 2011<br />III. Temporary Estate Tax Relief <br />Temporary estate, gift and generation skipping transfer tax relief. The EGTRRA phased-out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, and lowered the gift tax rate to 35 percent and increased the gift tax exemption to $1 million for 2010. The proposal sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes for two years, through 2012. The exemption amount is indexed beginning in 2012. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011. The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year.<br />
  9. 9. Proposed Tax Changes for 2011<br />Conservation Gifts & Capital Gains<br />For those clients considering the philanthropic disposition of property for purposes  of conservation, the following is being contemplated.<br />Extension of provision encouraging contributions of capital gain real property for conservation purposes. The bill extends for two years (through 2011) the increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes.<br />
  10. 10. Proposed Tax Changes for 2011<br />Tax Free Distributions to Charity from IRA Account<br />Continuing on the theme of philanthropy, if approved, there will continue to be opportunity to make charitable contributions from your retirement account without attracting a tax penalty.<br />The bill if approved in its current form extends through 2011 the provision that permits tax-free distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year. The bill allows individuals to make charitable transfers during January of 2011 and treat them as if made during 2010.<br />
  11. 11. Proposed Tax Changes for 2011<br />Changes to Regulated Investment company (RIC). <br />Do you have investments in an offshore owed Regulated Investment company (RIC). <br />Here’s what changes you might be able to expect if the current bill is extended.<br />
  12. 12. Proposed Tax Changes for 2011<br />Estate tax look-through of certain Regulated Investment Company (RIC) stock held by nonresidents. Although stock issued by a domestic corporation generally is treated as property within the United States, stock of a RIC that was owned by a nonresident non-citizen is not deemed property within the United States in the proportion that, at the end of the quarter of the RIC’s taxable year immediately before a decedent’s date of death, the assets held by the RIC are debt obligations, deposits, or other property that would be treated as situated outside the United States if held directly by the estate (the “estate tax look-through rule for RIC stock”). The proposal permits the look-through rule for RIC stock to apply to estates of decedents dying before January 1, 2012.<br />
  13. 13. Proposed Tax Changes for 2011<br />By the time you read this, much may have been changed.  <br />What we know for sure is that there will be change and it will impact our elder and special needs clients. <br />Please consult with us, or with an appropriate elder law attorney as you make decisions that will impact your taxable situation for the coming years.<br />
  14. 14. Proposed Tax Changes for 2011<br />Boston Elder Law Attorneys<br />Specializing in Medicaid Planning<br />Cohen & Oalican, LLC<br />617-263-1035- Boston<br />508-821-5599 – Raynham<br />978-749-0008 - Andover<br />

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