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Posted January 3, 2013 | Leave a comment
Heirs can breathe a sigh of relief thanks to tax bill
By Sally Voth
This week's passage of a federal tax package may just save the farm -- and other inheritances -- for some heirs.
Those who inherit won't be taxed until the value of a family estate hits $10 million, or an individual estate hits $5 million. That is the same as was the case before Tuesday's legislation, but the rate is now capped at about 40 percent, up from 35 percent.
"That wasn't on most people's radar," said Lord Fairfax Community College professor of business management and administration and financial services Jim Guiliano.
The tax exemption was due to expire and would have been lowered to estates worth $1 million or more, he said.
"That's real important to people that have family businesses," Guiliano said.
The lower tax threshold could've left some heirs of family businesses facing the prospect of having to sell those businesses just to pay the estate taxes, the professor said.
Guiliano also talked about the budget cuts that were supposed to be automatic had the country plunged off the fiscal cliff.
"That was going to be pretty severe," he said. "That's what the big dispute that's looming out there a couple months down the road [is about]. What I think we might see will be things like ratcheting up the Medicare eligibility age."
That was already done a few years ago with Social Security, and Guiliano predicts Medicare will follow suit.
And while other budget cuts coming down the pike soon may affect people in areas such as Northern Virginia that are heavily dependent on governmental contracts, he said he doesn't feel residents of the Northern Shenandoah Valley will be as concerned about those.
"Agencies will sometimes become reluctant to issue new contracts because they don't know what their funding is going to be," Guiliano said.
Using tax increases to bring down the national deficit is not the way to go, according to tax preparer Bill Jennings of Edinburg. Jennings is also an enrolled agent, which means he can represent taxpayers before the Internal Revenue Service.
"If a person has more money to keep, then they can spend money and stimulate the economy," he said.
Increased buying leads to increased production, and therefore more tax revenue going to the federal coffers, Jennings said.
"When you raise taxes, you have less money for people to spend," the tax preparer said.
The Associated Press contributed to this report.
Contact staff writer Sally Voth at 540-465-5137 ext. 164, or firstname.lastname@example.org
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