https://www.irs.gov/pub/irs-pdf/f6251.pdf is the AMT calculation form. Schedule A deductions that are added back for the purpose of calculating the AMT are state/local/property taxes and miscellaneous deductions, but not charity deductions. Mortgage interest deduction may be different for AMT.
Since our house is paid off, keeping the mortgage interest deduction doesn’t affect us. OTOH, eliminating the deduction for state taxes and property taxes sure does.
Also, those who will inherit from very large estates (over $5.49 million, about 0.2% of all estates) will gain from the elimination of the estate tax.
Married couples get to deduct 2X the $5.49M if they do it correctly… so yes, very, very big estates. OTOH, don’t expect repeal of state estate taxes if your state has them.
That’s what I meant with the family businesses over $10 million. For most people, the federal estate tax kicks in at $11 million, since the $5.49 M exemption can be shared between spouses.
This bill is really targeted at things that would be meaningful to a wealthy commercial real estate developer who is a Florida resident.
@dadx thanks for catching that, I meant to say the cap should be lowered.
How many super wealthy families actually pay the estate tax? They lock up everything in trusts and avoid it.
Not saying we should get rid of it, but it doesn’t generate as much outrage for me as the loss of deductions for state, local, and property taxes. That seems designed to punish blue states and states that are already net givers rather than takers.
This is all very preliminary anyway.
Ditto.
One problem is the estate tax rules are too complicated as exemplified by this article in Forbes.
https://www.forbes.com/sites/ashleaebeling/2015/03/25/the-surviving-spouse-estate-tax-trap/#31ea6f656bb5
I would have no problem with the estate tax being kept the way it is if family farms, family stores and other businesses were not included in the value of an estate. No one should have to sell the family business because an elderly person wasn’t savvy enough to know all the complicated rules.
I would also be in favor of not permitting the super wealthy to avoid the estate tax through foundations and trusts.
“This bill is really targeted at things that would be meaningful to a wealthy commercial real estate developer who is a Florida resident.”
Agree with you, JHS.
@greenwitch, According to this article: “the framework would do away with the estate tax, which applies to estates larger than $5.49 million for an individual. Just 0.2 percent of the people who die every year owe the tax, and eliminating it would cost the government $269 billion over a decade.”
https://www.nytimes.com/2017/09/27/opinion/a-boondoggle-masquerading-as-tax-reform.html
I can see a lot of horsetrading going on before this bill is final. I suppose the plan eliminates the interest deduction for student debt? That could be added back in in exchange for eliminating the mortgage deduction on mortgages over $500,000. That would be politically popular, I would think. Poor students versus wealthy homeowners.
According to this article, 45% of households pay no federal income tax - at all. It would seem that about half the country would be unaffected.
IMO, any changes to the federal taxation system should include regional adjustments.
Could someone clarify for me…did I hear that off Shore eanings would not be taxed? Do do I have that incorrect!
http://www.taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax indicates that, for 2016, there were 11,200 estate tax filings, 5,300 of which showed estate tax due. The total amount of estate tax was $19.3 billion, or an average of $3.6 million of estate tax per taxable estate. That looks like a little less than 1% of tax revenue (versus about 47% from individual income tax, 34% from payroll tax, and 11% from corporate income tax).
Even extremely large family businesses? Examples from 2001:
http://www.cojoweb.com/ref-companies-Am-largest.html
Largest without publicly traded stock: Cargill, Koch Industries, Mars, Publix Super Markets, Bechtel Group, Fidelity Investments
Largest with publicly traded stock: Wal Mart Stores, Ford Motor Company, Motorola, Viacom, Loew’s, Weyerhaeuser, Gap, News Corp
Ha! Yeah I was thinking more of a family farm or a small business like a corner store. Even a small pharmacy or grocery store in the right location could be worth more than the exemption.
It fries me that some extremely wealthy people do everything they can to avoid estate tax through off shore trusts, foundations that give their kids ‘jobs’ for life and such. Meanwhile those who have a small business who don’t have expensive lawyers and may not realize what they are facing, get hosed.
This is a detail still missing. From the NYT - https://www.nytimes.com/2017/09/27/us/politics/trump-tax-cut-plan-middle-class-deficit.html?mcubz=3
As I understand it, some of the thought behind this is that for all of those offshore profits coming back home would be the impetus for an improved US economy
Well, I can’t see that leading to any unsavory deals. No, not at all, not ever.
“As I understand it, some of the thought behind this is that for all of those offshore profits coming back home would be the impetus for an improved US economy.”
The last time they did this repatriation of funds that is not what happened.
“In 2004 under President George W. Bush, Washington let corporations temporarily bring money from offshore profits at a flat rate of around 5.25%. But a few years later, Bush’s own chief economic advisors said there was no evidence that jobs were created as a result.”