Tuesday, September 13, 2016
Courtyard Marriott / Monroeville
3962 Wm Penn Highway
Monroeville, PA 15146
Between Sheetz and Eat ‘n Park
Tuesday, September 13, 2016
Holiday Inn Express
6552 Route 22
Delmont, PA 15626
Behind Lamplighter Restaurant on Rt. 22
Wednesday, September 14, 2016
TownePlace Suites / Pittsburgh
2785 Freeport Road
Pittsburgh, PA 15238
Just off of Exit 48 of PA Turnpike
Wednesday, September 14, 2016
The Estate Planning Centers
3824 Northern Pike, Suite 801B
One Monroeville Center
Monroeville, PA 15146
Just west of Red Lobster on Rt. 22
Saturday, September 17, 2016
Holiday Inn Express
6552 Route 22
Delmont, PA 15626
Behind Lamplighter Restaurant

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Tax Plans: Obama vs. Romney

What does the election mean for your taxes?
As we face the coming Presidential election, I thought it might be helpful to provide a summary of the tax plans I have seen from the two main parties, as they pertain to my clients. I’m not taking sides, nor can I claim intimate familiarity with their final plans, but here is what I have seen.
Estate Tax 
Obama: 45% tax rate on estates over $3,500,000.
Romney: Eliminate the Federal Estate Tax.
Current law: Unless the law is changed, in 2013 the Federal Estate Tax applies to estates over $1,000,000, with rates as high as 55%. (Note: in 2012, the tax rate is 35%, and only on estates over $5,120,000, but that patch to the tax code expires 12/31/2012).
Salaries and Ordinary Income
Obama: 2012 rates of 10%, 15%, 25% and 28% remain in place for 2013, but increased rates for high-income families (singles over $200,000, married joint over $250,000) to 36% and 39.6% (from 33% and 35%), with consideration of a rule to require any household earning over $1,000,000 to pay at least 30% despite other deductions.
Romney: Reduce current rates by 20% to: 8%, 12%, 20%, 22.4%, 26.4% and 28%.
Under current law, in 2013 there will be five tax brackets, 15%, 28%, 31%, 36% and 39.6%.
Investment Income
Obama: 15% maximum rate on capital gains for families with income under $250,000, 20% rate for those with higher income.  Dividends would have a 15% rate for all except the high-income families, who would pay at their 36% or 39.6% ordinary income rates. Retains the 3.8% Medicare surtax on investment income for high income individuals.
Romney: 0% tax on capital gains, dividends and interest for those with income under $200,000, with 15% rate for those with higher income.  Repeal the 3.8% Medicare surtax.
Under current  law, in 2013  long term capital gains are to be taxed at 18-20% (depending on when acquired and if held more or less than 5 years), dividends and interest are to be taxed at ordinary income rates, and the new 3.8% Medicare surtax on high income individuals begins.
Alternative Minimum Tax
Obama: Continue reindexing the AMT exemption annually for inflation.
Romney: Repeal the AMT.
Under current law, AMT continues in effect, requiring annual legislation to attempt to adjust for inflation.
My Thoughts…
Yes, I know there are subtleties to the respective plans that I have omitted or overlooked, and there are certainly spending cuts that would have to accompany decreased revenue under the Romney plan, just as there are increased expenditures under the Obama plan. I am not attempting to inject my personal politics in this discussion, but instead want to just hit the main points on their tax plans.
Interestingly, the Federal Estate Tax is one area where both parties agree that the current law in effect for 2013 needs to be changed to substantially decrease or eliminate the death tax imposed on families in this country, however neither party has enough traction to get anything done or to work a compromise. My best prediction for the near future is that the legislature will enact a statutory band-aid for 2013 and perhaps 2014, to keep an estate tax rate around 35-40%, applicable to estates over roughly $3,500,000 to $5,000,000.  The lack of certainty regarding the short term decisions, let alone the long term fixes, should remind us all to remain flexible in our planning and thinking.  For my estate planning clients, I intend to continue to incorporate frequent use of disclaimer credit shelter trusts, which provide us the ability to maximize the use of the available estate tax credit at death, while at the same time providing the ability to side-step this trust if the estate tax is successfully repealed or limited.
Beyond that, we will see what November brings.  While the election results will be informative, the real question is whether, and how, the tax law changes before the end of 2012.  If you don’t have flexible estate tax planning incorporated in your plan (i.e. you didn’t get it from me), we should talk.  If you do have this planning in place, and your assets are in the range of $5,000,000 to $10,000, 000, we should keep in touch between now and December to see if we need to make any last minute adjustments to take advantage of changes which may arise in the law, or to put stronger planning tools in place which we deferred earlier in the hope that our government would fix this problem.  In short, if you have questions about how you stand relative to the Federal Estate Tax, don’t hesitate to reach out to speak with us.