As we just passed President’s Day, I thought it would be apropos to discuss some changes which President Obama would like which are in the proposed budget. Of course, since President Obama is part of the Democratic Party and since the Republican Party holds majorities in both the House of Representatives and the Senate, I would not expect many of his proposed changes to actually be enacted. But, you never know. Even in this current dysfunctional Washington, some legislation passes.
Here are some of President Obama’s proposals in the fiscal 2017 budget, which was released earlier this month:
- Estate Tax: The President would turn back the clock to 2009. That’s when we had a $3.5 million estate tax exclusion, a $3.5 million GST tax exemption, a $1 million gift tax exclusion, and no inflation indexing.
- Basis Consistency: The President would expand the basis consistency reporting requirement of Section 1014(f) to include property eligible for the marital deduction and gifts required to be reported on a federal gift tax return.
- Capital Gains Tax: The President would increase the maximum capital gains tax rate to 28%, including the 3.8% Affordable Care Act surtax. Currently, the top capital gains tax rate is 23.8%, when including the surtax.
- Deductions: The value of some deductions for taxpayers in the 33%, 35%, and 39.6% brackets would be reduced to 28%.
- Credits: The proposal would increase the child and dependent care credit to $3,000 per child for those with a child under age 5. The phasedown limit of the credit would apply to taxpayers with AGI of $120,000. Now the phasedown begins at $15,000 of AGI.
(For more information on the proposed budget, see President’s Budget Proposes Many Tax Changes in the Journal of Accountancy.) Of course, these proposals are only proposed changes. Some of these might get some traction, but it is extremely unlikely that the estate tax or capital gains tax changes the President is proposing would garner the support needed for passage, especially in an election year.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555