Jonathan Wittlin CPA®, CFP Head of Financial Planning
February 22nd, 2017 | 10:05 AM

The nation’s tax system has been largely in a steady state for several years, but that may change in 2017. Republican control of the Presidency, House, and Senate opens the door for significant change, however, what that change may look like is anybody’s guess at this point. It is still too early to know what President Trump will officially propose and most of the chatter around his policy is based on various strategies he promoted throughout his campaign. Those strategies do have some overlap with “A Better Way,” the document released by House Republicans this past summer detailing their tax reform proposals. Some common themes include:

  • Reduction of current personal income tax brackets and rates with a top rate of 33%
  • Elimination of the 3.8% net investment income tax associated with the Affordable Care Act
  • Elimination of the Alternative Minimum Tax (AMT)
  • House Republicans have long favored the repeal of the Estate Tax and President Trump has also talked about it. That said, this is going to be a difficult fight in the Senate. Many Washington insiders and Tax and Estate attorneys feel that there will be some sort of compromise as opposed to an outright repeal. Since there has been an estate tax in 99 out of the past 100 years, the need to do proper estate planning is still important, regardless of what happens regarding the estate tax.
  • President Trump has endorsed a reduction in the business tax rate from 35% to 15% while House Republicans have a scale that varies from 20% to 35% based on the type of business in question.

We are hopeful that we will begin to gain some clarity on these issues not long after President Trump takes office on January 20, but the reality is that it could be one to two years before any of these policies are enacted. TAX DOCUMENTS To prepare for your tax return filings, we suggest you start gathering your documentation now. Essential items to collect include Forms W-2, K-1 and 1099 as well as charitable contribution documentation, and any property tax and mortgage documentation. For our clients enrolled in the Lenox Personal CFO program, we encourage you to send this information to us to be scanned and added to your vault, and we can then forward everything to your tax preparer.

You do not need to wait until December to fund your Trusts or to make your annual gifts. The annual exclusion for 2017 will remain at $14,000. The limit for exclusion gifts to a non-citizen spouse has increased from $148,000 to $149,000 for 2017. Making these gifts early in the year removes from your estate both the value of the gift and any appreciation on those dollars through the course of the year.

The Estate, Gift, and Generation Skipping Transfer Tax exemption has increased to $5,490,000 per person for 2017. The top Federal tax rate remains at 40%. If you have not completed an estate plan, or if your plan has not been reviewed or updated over the last five years, we strongly encourage you to make this a priority for 2017.

Note that there have been some recent changes to State estate tax law. For instance, the New Jersey estate tax will be repealed effective January 1, 2018, though the state’s inheritance tax, which applies to all but spouses and children, is still in effect. Check with your Estate Planning Advisor to see any changes in your home state. The information provided herein is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. Entities or persons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek specific advice from their personal tax or legal counsel.

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