2012 American Taxpayer Relief Act

President Obama and Congress bantered back and forth for a significant period of time with regard to the American Tax Payer Relief Act of 2012 (ATRA). While the United States stood on the brink of bankruptcy, these two branches of government were exchanging political salvos against each other. Eventually Congress passed the American Tax Payer Relief Act. It was signed in to law by President Obama on January 2, 2013. The following are a list of the key provisions of the Tax Payer Relief Act of 2012:

President Obama and Congress bantered back and forth for a significant period of time with regard to the American Tax Payer Relief Act of 2012 (ATRA). While the United States stood on the brink of bankruptcy, these two branches of government were exchanging political salvos against each other. Eventually Congress passed the American Tax Payer Relief Act. It was signed in to law by President Obama on January 2, 2013. The following are a list of the key provisions of the Tax Payer Relief Act of 2012:

1. The government has decided to maintain the 5 million dollar estate gift and generation skipping tax exemptions. These exemptions are being indexed for inflation moving forward. For the year 2012, the exemption is five million, one hundred twenty thousand dollars. For the year 2013, it is expected the exemption will be five million, two hundred fifty thousand dollars for a single tax payer. The exemption for a married couple would be ten thousand five hundred dollars.

2. Portability provisions that were adopted pursuant to the 2010 Tax Relief Act are being maintained. A surviving spouse can use his or her deceased spouse’s gift and estate tax exemption.

3. With the good comes the bad. The line gift and generation skipping tax has been increased to 40% from the previous rate of 35%.

4. The portable election. A surviving spouse must make an election on a federal estate tax return to maintain the portable of the deceased spouse’s unused gift and estate tax exemption.

5. New York State has its own inheritance tax laws. New York has decided to keep one million dollars as its threshold for estate taxes. However, New York has repealed its gift tax which allows individuals an unlimited gift tax exemption.

6. The portability exemption under the Federal Tax law has not been adopted by New York State.

Conclusion

The Tax Payer Relief Act Of 2012 prevented the return to much lower rate of estates. The new law is a permanent statute that does not have an expiration date. The impact of this new law is many estate plans that were prepared in the past may need to be updated to deal with the new regulations concerning Federal estate taxation related to the American Tax Payer Relief Act of 2012.

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