San Antonio, Texas (210) 826-1122
Bellevue, Washington (425) 296-2919



PAUL PREMACK, JD, CELA*
8031 Broadway
San Antonio, TX 78209
*Licensed in Texas
BENJAMIN PREMACK, JD** 
11900 NE 1st Street
Bellevue, WA  98005
**Licensed in Washington State & Colorado


San Antonio Probate, San Antonio Estate Planning, San Antonio Elder Law

 
Paul Premack, Express News

San Antonio Expres News & MySA.com
Copyright 2015, Paul Premack
December 29, 2015

A brief breakdown of 2016 Tax Act and how new adjustments may impact you

Dear Mr. Premack: I just got a brief email from a charity to which I make donations. They said there is a new tax law and I should give them a boatload of money. What is the new law? Any details? – D.S.
 
Congress passed and on December 18 the President signed the Consolidated Appropriations Act of 2016 (HR 2029) which contains a law called the “Protecting Americans from Tax Hikes Act of 2015”. There are a few items in the lengthy Act that may impact you.
 
First, the Act makes permanent your ability to deduct state and local sales taxes on your 1040 tax return. This was scheduled to expire so that you would not be able to claim that deduction in the future. Now it will continue without the need to be reconsidered by Congress every few years.
 
Second, the Act makes permanent the deduction when a conservation easement is placed on a tract of land. Landowners have had the power for many years to ban future development of their land, even if they sell the land. These conservation easements are helping to protect natural resources and open spaces. The tax deduction associated with conservation easements is now permanent.
 
Third, the Act enables people who have reached age 70 ½ to make gifts directly from their IRA accounts to charity, up to $100,000 in a calendar year. This has been on a roller coaster ride for many years, with Congress passing extensions at the last minute. Now the law has no expiration date, and people with large IRA accounts can make non-taxable donations directly from those IRA accounts. This provision is probably the one about which you received the email.
 
The Act contains a myriad of provisions giving tax breaks to businesses and corporations. It grants, for instance: tax favored treatment for certain dividends paid by regulated investment companies, tax-free gains on certain small business stock, and special treatment for financing income earned by insurance companies and banks. Breaks include credits for maintaining railroad tracks, for training mine rescue teams, for depreciating the value of a racehorse, for building a motorsport entertainment complex, etc. These provisions can only be appreciated by tax accountants and are of no help to individual taxpayers.
 
Tax relief has also been provided for families and individuals. Deductions for qualified tuition are continued, mortgage insurance premiums can be deducted like mortgage interest, and there is no taxable income when a mortgage debt is discharged in bankruptcy (but only for one year). Those three obscure tax breaks are the entire package of benefits to families and individuals.  
 
Separate from the new Tax Act, the IRS has announced new numbers for the 2016 Estate Tax and Gift Tax exemptions. The gift tax annual exclusion has not been adjusted, and remains at $14,000 for 2016.
Federal estate tax is imposed upon an individual’s death when that person’s estate exceeds a certain limit. In 2013 the limit was set at $5 million per person, expanded to $5.43 million in 2015, and has now been increased to $5.45 million for 2016. This mini-increase of $20,000 helps offset appreciation in asset values.


Disclaimer: This column answers a specific legal question asked by an individual in Texas. The answer may or may not match your individual situation. Be careful not to treat this column as specific legal advice, as it may not meet your individual needs. It may give you a solid basis for discussion with your own attorney.  You should consult with your personal attorney before you take any action on this or any legal issue. Also, please be aware that laws change, so  this column is valid only as of the date it was published. This communication does not create an attorney-client relationship between the author and the reader.

 

 

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