Estate Tax Back from the Grave? Tax Cuts to Take Its Place?

As the current year quickly comes to a close, so do the Bush administration’s income tax cuts and estate tax exemptions. But Congress will surely fix that.

Maybe, but maybe not. The Economic Growth and Tax Reconciliation Act of 2001 called for a gradual rise in the estate tax exemption while cutting income tax rates. The increased estate tax exemptions and income tax cuts are both set to expire by the end of 2010.

So what happens if the federal estate tax reemerges come January 1? Estates valued at more than $1 million could be taxed up to 55 percent, plus a possible 5 percent surcharge on certain estates.
While $1 million seems like a lot, houses, retirement funds and other assets add up quickly, which means many more taxpayers could be impacted.

And will the 2003 tax cuts become permanent or will some (or all) expire? Right now it’s hard to say, considering Congress has adjourned without addressing either issue. Meanwhile, CPAs in financial planning and tax preparation are left to continue serving their clients amid this uncertainty.

Check out some recent articles on the topic, and tell us what you think about this issue:

• Congress Leaves Tax Pracs in Limbo (WebCPA)
• Bush Tax Cut Dithering Might Lead to Shrinking Paychecks (AccountingWEB)
• Op/Ed: Ending Tax Cuts Now Would Be a Mistake (SmartPros)
• Bush Tax Cuts Set to Expire — Should They? A Tax Fable to Englight (AccountingWEB)
• How Will the Expiring Bush Tax Cuts Affect You? (Forbes)
• Economists: Extend Bush Tax Cuts for Everyone (CNNMoney)