2012 Tax Year
in Review -
Don't Die Here
- ATRA Retroactive Provisions -
- Healthcare Mandate Starts in 2014 -
New 20% Net
Capital Gains Rate
Tax Year in Review
2012 resolved many tax uncertainties, created others & set the
stage for future tax reform. If you like details then
click here for my 17-page report on the 2012 Tax
Don't Die Here
Recently passed federal legislation increased the exemption
amount before your estate pays taxes on your assets when
The amount for 2013 is $5.25 million. This makes most of our
estates tax-free when we die. Or does it?
Where you live could cost you a bundle in inheritance and
estate taxies since 21 states have some form of estate taxes,
inheritance taxes, or both. To make matters worse, this state
tax landscape is constantly changing making it tough to stay
current. Here is useful information on which states want a cut
of your money when someone passes away.
8 states currently tax your inheritance. The following states
charge inheritance tax: Iowa, Nebraska, Indiana, Pennsylvania,
Kentucky, New Jersey, Tennessee, and Maryland. The tax rate
can be as high as 20% and start with inheritance as low as $1
if you are unlucky to inherit money and live in Pennsylvania
Some states have estate taxes starting at lower amounts than
the federal $5.25 million. Noted here are these states' estate
tax exemption amount and their maximum estate tax rate (in
Some states match the federal exemption amount. These states
match the current federal estate tax exemption, but charge
their own estate tax as well.
Two states charge both. New Jersey and Maryland currently
charge both an estate tax and an inheritance tax.
What can you do?
1) Understand inheritance consequences. If you have a
relatives mentioned in your will that live in Iowa, Nebraska,
Indiana, Pennsylvania, Kentucky, New Jersey, Tennessee or
Maryland, you may wish to conduct some planning activities.
2) Move before it is too late. 29 states have no estate
taxes (or inheritance tax). Many of them (Florida, Texas,
Alaska, South Dakota, Nevada, and Wyoming) also have no state
income taxes. But prior to packing your bags, review other tax
implications within your target "move to" state.
3) Set up a trust. If you live in one of the states
with estate taxes, consider setting up appropriate trusts to
help protect your assets from the state tax man.
4) Gifts? Remember you can also use gifts as a means of
transferring some of your assets tax-free. Just make sure you
understand the limits on tax-free gift giving.
5) Want more information? Visit each state's respective
web site and review their estate and inheritance laws.
ATRA delays start to 2013 filing season; requires careful
planning for retroactive and prospective provisions
As the 2013 filing season gets underway, some taxpayers may
experience delays in filing returns and others need to revisit
their returns because of the passage of the American Taxpayer
Relief Act (ATRA) on January 1, 2013. Late tax legislation
always complicates tax planning and filing and 2013 is no
exception. ATRA extended many popular tax incentives for
individuals and businesses retroactively to January 1, 2012.
This means that qualified taxpayers may claim them on their
2012 returns filed in 2013. ATRA also made many changes that
take effect in 2013, which will require careful planning as
this year unfolds. For the rest of this article
introduces simplified method for claiming home office
The IRS has announced a new optional safe harbor method,
effective for tax years beginning on or after January 1, 2013,
for individuals to determine the amount of their deductible
home office expenses (IR-2013-5, Rev. Proc. 2013-13). Being
hailed by many as a long-overdue simplification option,
taxpayers may now elect to determine their home office
deduction by simply multiplying a prescribed rate by the
square footage of the portion of the taxpayer's residence used
for business purposes. For the rest of this
guidance on health care employer mandate looks to 2014 start
Under the new health care law, starting in 2014, "large"
employers with more than 50 full-time employees will be
subject to stiff monetary penalties if they do not provide
affordable and minimum essential health coverage. With less
than eleven months before this "play or pay" provision is
fully effective, the IRS continues to release critical details
on what constitutes an "applicable large employer," "full-time
employee," "affordable coverage," and "minimum health
coverage." Most recently, the IRS issued proposed reliance
regulations that provide employers with the most comprehensive
explanation of their obligations and options to date.
For the rest of this article
How Do I
Compute the new 20 percent net capital gain rate under the new
Beginning in 2013, the capital gains rates, as amended by the
American Taxpayer Relief Act of 2012, are as follows for
individuals: For the rest of this article
What are above-the-line deductions?
An above-the-line deduction is an adjustment to income
(deduction) that can be taken regardless of whether the
individual taxpayer itemizes deductions. The adjustment
reduces the taxpayer's adjusted gross income (AGI). These
adjustments are also sometimes called deductions from gross
income, as opposed to itemized deductions that are deducted
from AGI. An above-the-line deduction is taken out of income
"above" the line on the tax form on which adjusted gross
income is reported. For the rest of this
tax compliance calendar
As an individual or business, it is your responsibility to be
aware of and to meet your tax filing/reporting deadlines. This
calendar summarizes important tax reporting and filing data
for individuals, businesses and other taxpayers for the month
of February 2013. For the rest of this article
To read this & my other articles online go to
and click on the Newsletter section.
always you can call me at 714-619-0667 if you have any
questions about investing, retirement or any other tax &
accounting related issues.
Regards, Monica Rebella, CPA/IAR
President, Rebella Accountancy