Archives For Estate Planning

If you live in the DMV area and are trying to avoid creating a major headache for your family/friends after your death, pay attention to the case I am about to outline. It bluntly shows the importance of attending an estate planning session at JDKatz as soon as possible.

In a potentially damaging move during a likely Oscar-winning year for Julia Roberts, her half-sister, Nancy Motes, committed suicide this past week.

Roberts is up for Best Supporting Actress for “August: Osage County.” On the other hand, Nancy, who complained that she could not compete with her skinny and more talented sister, was an aspiring actress who had most recently worked as a production assistant on Glee.

Julia Roberts (left) and half-sister, Nancy Motes (right)

This Polaroid shot is a close-up of the picture Motes is holding in the picture above this picture. Motes (left) is standing with Roberts (right) when she was around 22 years old.

This Polaroid shot is a close-up of the picture Motes is holding in the picture above. Motes (left) is standing with Roberts (right) when she was around 22 years old.

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Check out this infographic if you are curious about how Presidents in the last 20 years have raised or cut taxes for you.

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With a 5-4 decision, the Supreme Court struck down section 3 of the Defense of Marriage Act (DOMA), which required same-sex spouses to be treated as unmarried for purposes of federal law. The ruling, however, does not mean that states, which currently ban same-sex marriage, now have to permit it.

Though it is not considered tax law, the repeal of this particular legislation means there are new tax consequences. Same-sex couples should look into refiling their taxes, where applicable; the repeal of DOMA could mean more money from Uncle Sam.

With the help of the Wall Street Journal’s MarketWatch section, here are some of the important tax breaks now given to same-sex couples.

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It’s that time of year again!  And 2012 may be the last year that the status quo rules for charitable deductions are in place.  The fiscal cliff is all but sure to bring a bundle of higher taxes, capped or nixed deductions, etc., so enjoy re-distributing your wealth like you normally would while you still can!  Below is an infographic from H&R Block, outlining the basics on charitable giving.  See the IRS’ tips for deducting charitable contributions for additional information.

Happy Giving!

IG - Charitable Giving-F

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

In 2013 some wealthy earners will be subject to a new medicare tax (see Infographic); no, this isn’t the medicare payroll tax (although that too will also increase for some earners), rather it is an additional 3.8% tax applied to Net Investment Income for wealthy earners. To be subject, US earners must have an Adjusted Gross Income of $200,000 for individuals or $250,000 for couples filing jointly. Additionally, they must have some form of unearned income from investments in which they are passively involved, meaning they do not have material participation in the activity. This net investment Income can include earnings from property sales, rents, estates and trusts, annuities, stocks, bonds and more. With the changes, anyone who might be subject to the tax (which, by the way, is less than 4% of Americans), should seek a financial advisor immediately to plan for 2013 and beyond.

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Unearned Income Medicare Contribution

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JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

The Highest State and Local Income Taxes on Million Dollar Earners

If you thought the partisan hackery over raising taxes on the wealthy was limited to Washington, think again.  National feuds have a way of trickling down to the state and local government (SLG) level, and tax policy is no exception.  In California voters passed proposition 30 – a tax hike measure which adds three new upper income brackets; but in New Hampshire, a constitutional amendment that, “explicitly forbids the Legislature from imposing any new income tax on personal income,” was also approved.

In 2012, SLGs across the country had historically high and low income tax rates on million dollar earners.  Forbes.com asked Wolter Kluwer’s CCH division to calculate taxes for married couple with a $1,000,000 salary and $110,000 of itemized deductions in the largest city in each state.   We reproduced  and analyzed their data in the charts and tables below.  Here are the top 10 steepest bills:

  1. New York (New York City)
    • It’s no shock that the big apple, known for its high cost of living, has the highest tax rates in the nation.  Until recently, the state had a “millionaires tax,” which was actually a surcharge on individuals making over $200,000/year.  That was eliminated at the end of last year when Gov. Cuomo and legislative leaders came to an agreement on a massive state tax reform plan, which lowered rates for high income earners to less then what they were with the surcharge.  Of the cities/states analyzed, New York had the highest drop from 2011-12; still, the state remains the most expensive for millionaires.   Critics cite that the richest 1% of New Yorkers pay nearly 40% of the income tax, but that isn’t astounding given that nationwide the top 1% pay 37% of all income tax.
  2. Hawaii (Honolulu)
    • If you make over $400,000 in Hawaii, you’re stuck with the highest state income tax rate in the country.  There was no change in 2012 and potential homebuyers shouldn’t expect one anything soon.  Paradise isn’t a cheap date, but Hawaii is one of the richest states and its tax rates aren’t scaring millionaires away.  In fact, they have more millionaires as a percentage of their population then any other state!
  3. California (Los Angeles)
    • California has been making headlines with their new tax legislation.  Proposition 30 passed on Nov. 6th, by a vote of 54.5% – 45.5%, creating three new upper income brackets retroactive to Jan 1st.  The combined state and local income tax rate for Los Angeles is the highest in the country, but there are enough loopholes in the code to make California the third most expensive place for millionaires.
  4. Oregon (Portland)
    • There are no local income taxes in Portland, but the top state rate of 9.9% is enough to put the state in fourth place.  Unlike the above states though, the top rate starts at incomes of only $125,000.  But hey, at least Oregonians can rejoice in being one of only five states that have no sales tax.
  5. Maryland (Baltimore)
    • As a Maryland/DC based law firm with a specialty in tax law, it’s only fitting Baltimore and DC are the next two on this list.  The state tax top bracket – 5.75% isn’t exactly intimidating, but when you add “Charm City’s” 3.2% flat rate, you’re left with a healthy 8.95% rate for earners making $300,001 or more.
  6. District of Columbia
    • DC Residents are known for their “taxation without representation” license plates, referring to their lack of voting representation in congress and subjection to federal income tax.  To add insult to injury, the District itself, which always seems to be stripped for cash, has a top rate of 8.95% for individuals or couples making over $350,000.
  7. Minnesota (Minneapolis)
    • Million dollar earners in the City of Lakes will owe $78,874 in taxes to Minnesota in 2012, giving them the 7th steepest tax burden of the largest cities in each state.  If you were wondering about Minneapolis’ twin city – St. Paul, there is little to no difference in tax policy (they’re not called twin cities for nothing) except that the sales tax rate is 0.15% cheaper.
  8. Maine (Portland)
    • Maine doesn’t allow local governments to collect taxes, however, the top rate of 8.5% starts for couples making $40,700.  Millionaires shouldn’t feel too exploited here (not that there are many).  The lumber state usually falls in the bottom 10 in millionaire residents.
  9. Vermont (Burlington) 
    • Vermont cities collect very few local taxes, but unlike their neighbor Maine, the top rate of 8.95% starts for couples with $379,151 (Maine = $40,700) or more income.  This may deter some rich ski lovers from retiring in their winter mountain condo.
  10. Delaware (Wilmington)
    • Wilmington has an earned income tax rate of 1.25%, bringing the combined state and local income taxes to 8% and making Wilmington the 10th worst city for millionaires and taxes.   Like Oregon, Delaware has no sales tax.

For all the juicy details, check out this data table we made from the information above:

Related Posts: The Top 10 Countdown: Which States Get the Most Federal Funding, What Size Fits the United States Government; Small, Medium or Large?, 2012 Tax Rate Card

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

On Dec. 31st, 2012 the Mortgage Forgiveness Debt Relief Act (MFDRA) will expire unless the lame-duck Congress renews it.  The act was signed into law five years ago, immediately after the housing bubble burst, in an effort to provide financial relief to impoverished homeowners by allowing them to short-sell their properties without having to pay taxes on the amount of forgiven debt.  For example, if you owe $400,000 on  your home and sell it for $300,000 you do not have to pay taxes on the $100,000 difference, which the IRS would traditionally count as income.  The IRS offers this provision for forgiven debt of up to $2 million from calendar years 2007 – 2012.  If the MFDRA is allowed to expire, any amount of forgiven debt on a short sale would be taxed again, placing a huge burden on the 24% of homeowners (11.3 M people) who are still underwater (owe more then their house is worth) and have a collective $692 billion in negative equity. It’s worth noting that young people are bearing the grunt of the burden; almost half of borrowers under age 40 are underwater.  Check out the breakdown from Zillow’s latest real estate report below:
The housing market has undoubtedly improved in the last half-decade, and all signs point to a continuance of that trend.  The  Fed recently announced a third round of quantitative easing, QE3,  where they will purchase $40 billion a month of mortgage backed securities for as many months as needed.  This action is intended to support the housing market and allow banks to cut interest rates modestly, which should allow more people to keep their home.  Moreover, Corelogic, an independent research firm, reports that home prices are rising in 19 to of 20 big cities and home prices increased by 5% on year over year basis in September, 2012 compared to September, 2011.  Still, the situation for those 11.3 million homeowners is unlikely to improve before the MFDRA expires.

It is still unclear whether or not an extension will be passed.  President Obama has publicly supported such a measure, but congress is not feeling very charitable right now (a 2-year extension would cost the treasury $2.7 billion) and an extension would have to be approved by both the House and Senate.  There has been bi-partisan support for an MFDRA renewal, but bringing it to the top of congress’ priorities is its biggest impediment.  This should be reason for underwater homeowners to worry, and may push them to sell their houses while they can still find some tax relief on a sale.  If an extension is not passed, they may have to wait a long time until the value of their property improves enough to account for the reinstated tax.  Of course, for most homeowners, the decision to move is not something that they can do anytime they like.  Even without the MFDRA, many homeowners find themselves stuck waiting for the value of their largest asset to improve to pre-crisis levels.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.