Year end US tax changes – UPDATED

UPDATE

Subsequent to the blog post below in mid-December a number of proposed and well-publicised changes to tax rates were made. The following confirms the current rates for the sake of clarity:

  • Federal income tax rates did rise to 39.6% although the top rate band increased from $388,500 to $400,000 for individuals and from $388,500 to $450,000 for married couples.
  • The increase in long-term capital gains did happen, as did an increase in the qualified dividend tax rate for top rate income tax payers to 20%.
  • The healthcare surcharge of 3.8% was implemented.
  • The proposed closing of the onetime Estate and Gift Tax window of $5.12 million did not happen, but was instead increased to  $5.25 million.
  • The Estate and Gift Tax rates did rise, but only to 40%, not 55%.

We hope you find this update useful.  Tanager Wealth Management LLP is not qualified to give tax advice, however we are happy to make introductions to professionals in this area.

What is about to happen, barring a major policy shift from Congress?  This is the big question for us over the next month, and, simply put, it means an increase in US personal tax rates.

What is about to happen, barring a major policy shift from Congress?  This is the big question for us over the next month, and, simply put, it means an increase in US personal tax rates.

Briefly:

  • Federal income tax top rates rise to 39.6%, from 35% currently.
  • Investors will pay 23.8% in long term capital gains (including healthcare surcharge of 3.8%), up from 15%.
  • Dividends will be taxed as ordinary income, no longer at the special 15% dividend rate.
  • December 31st also closes the brief window where the onetime gift tax exemption was $5.12 million, and lowers it back to $1 million.
  • Gift tax rates rise to 55% from 35%.

Any Opportunities?

There are great opportunities if you have been thinking about your long term estate planning, and act quickly.  We are happy to go over these with you before the New Year and help implement them ASAP.  It is always a tricky endeavor to live abroad – personally, professionally, and as a family.  Let’s have a discussion about how we can make your financial life a little bit easier.

Tanager Wealth Management LLP is not qualified to give tax advice. Please consult with a specialist US/UK tax advisor to discuss any of the points raised above.  We are able to make introductions if this would help you.

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