tax planning

These Are the Tax Breaks You Can Get When You Buy a House

July 6, 2024 By Asher Rubinstein, Esq.

Written by Josephine Nesbit, U.S. News. Featuring Asher Rubinstein, Gallet Dreyer & Berkey, LLP.

The IRS has specific rules regarding how homebuyers qualify for certain tax credits. There are also credits that are only available to first-time buyers.

Through 2025, taxpayers who itemize their tax deductions can claim a deduction on their federal tax return up to $10,000 each year for local property taxes paid, according to Rubinstein. “When the tax law changed in 2017, this was very controversial, because taxpayers previously had an unlimited deduction. The $10,000 limit is significant for taxpayers in high-tax states like New York and California.” Asher Rubinstein, Partner Gallet Dreyer & Berkey, LLP

Key Takeaways:

There are several tax breaks for homebuyers that can help make homeownership more affordable.
Tax credits apply to the tax owed, while tax deductions reduce taxable income.
Some tax benefits extend beyond the initial purchase of a home.

One of the biggest benefits of homeownership is tax breaks. If you’re a homeowner, tax credits and deductions could save you thousands of dollars per year. But are there tax credits for buying a house? And what about deductions? To help you come next tax season, here are tax credits and deductions you can get when you buy a house, and additional tax breaks that come with homeownership.

What’s the Different Between Tax Credits and Deductions?

Both tax credits and deductions can help a homeowner save money on their tax bill, but they work differently. “Both lower one’s taxes, but a credit applies to the tax owed, while a deduction applies to one’s income that is subject to tax,” says Asher Rubinstein, partner and tax, asset protection and trusts and estates attorney at Gallet Dreyer & Berkey in New York City. “In other words, it’s a matter of timing and when the tax discount is applied.”

There are also refundable and nonrefundable tax credits. According to the IRS, if your tax bill is less than the refundable credit, then you get the difference back in your refund.

Credits are typically much more valuable than deductions. “For example, someone with a $1,000 tax credit in the 20% tax bracket will see their tax bill reduced by $1,000. Someone with a $1,000 tax deduction will only see $200 in tax savings,” explains Eric Presogna, founder and CEO of One-Up Financial and a certified financial planner public accountant.

Standard vs. Itemized Deductions

There are two types of deductions available to all taxpayers: standard deduction and itemized deduction. If you take the standard deduction, you reduce your taxable income by a set amount. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. “There is no need for the taxpayer to keep records of individual tax deductions if the taxpayer takes the standard deduction,” Rubinstein says. Itemized deductions are individual tax deductions that could potentially add up to more than the standard deduction.

According to Presogna, homeowners should only take the standard deduction when they don’t have enough itemized deductions to exceed the standard. “With the SALT deduction (state, local, real estate taxes) currently limited to $10,000, a married couple would need more than $19,200 in mortgage interest, charitable donations and other qualifying deductions in order to warrant itemizing,” Presogna says.

Are There Tax Credits for Buying a House?

The IRS has specific rules regarding how homebuyers qualify for certain tax credits. There are also credits that are only available to first-time buyers. You generally qualify as a firsttime homebuyer if you’re purchasing your first home. However, you may still qualify if you’ve not owned a home for three years prior to the date of purchasing the new home for which the credit is claimed, according to the IRS. That home must be your principal residence.

One federal tax credit available to first-time buyers is through the Mortgage Credit Certificate (MCC) program. This program was designed to help lower-income families afford a home. The MCC program allows buyers to claim a dollar-for-dollar tax credit for a portion of the mortgage interest paid per year, up to $2,000. Eligible individuals must be first-time homebuyers, use the house as their primary residence and meet the program’s income and purchase price requirements.

There may also be tax credits available through your state. These buyer programs vary from state to state. You can research what may be available in your local area or look through the U.S. Department of Housing and Urban Development’s directory of local homebuying programs.

What is Tax Deducatable When Buying a House?

There are more tax deductions available to homebuyers and homeowners than there are tax credits, but Presogna says it depends on whether you itemize your deductions or take the standard deduction. Regarding homeownership, “If you have enough deductions to itemize, real estate taxes, home equity loan and mortgage interest are some of the larger deductible costs,” Presogna adds.

Keep in mind that not everything is deductible. According to Rubinstein, most costs associated with homeownership do not qualify for any tax benefits, including cosmetic upgrades, homeowners insurance and your mortgage principal, to name a few.

Here are Several Tax Deductions Buyers May Qualify for After Purchasing a Home:

First-time homebuyer savings account (FHSA). Some states offer tax benefits to first-time homebuyers to open an FHSA. This is a specific type of savings account that helps first-time buyers save up to $15,000 or $30,000 per year for a down payment, closing costs and other expenses related to their home purchase. You can deduct the annual savings from your state-taxable income, but limits vary by state.

Mortgage interest deduction. This is a deduction for interest paid on mortgage debt, but you will need to itemize your deductions to qualify for this tax break. “Under current law, this applies to loans up to $750,000,” Rubinstein says.

Property tax deduction. Through 2025, taxpayers who itemize their tax deductions can claim a deduction on their federal tax return up to $10,000 each year for local property taxes paid, according to Rubinstein. “When the tax law changed in 2017, this was very controversial, because taxpayers previously had an unlimited deduction,” he says. “The $10,000 limit is significant for taxpayers in high-tax states like New York and California.”

Mortgage points deduction. Per IRS guidelines, mortgage points are fees paid to take out a mortgage. This also includes origination fees or discount points purchased in order to reduce the interest rate.

Home office deduction. “If you’re a business owner or selfemployed and work from home, you may be entitled to a deduction for the portion of your home used for business,” Presogna says. However, Rubinstein warns that this is the most audited deduction due to the amount of taxpayers who try to claim this deduction. “The IRS has specific rules to follow. For instance, you can’t work from home for an employer. You have to use a dedicated room and you have to use it regularly. And there are square footage limitations,” Rubinstein explains.

Additional Tax Benefits of Home Ownership

Many tax benefits extend beyond the initial purchase of a home. The IRS offers some tax benefits for certain capital improvements, such as renovating your home office, making energy-efficient improvements or making changes due to a medical condition. If you take out a home equity loan to buy, build or improve your home, you could qualify for the home equity loan interest deduction. The IRS would classify the interest you pay on the borrowed funds as home acquisition debt, which may be deductible.

First-time homebuyers could also potentially qualify for a traditional or Roth IRA penalty waiver. If you meet IRS qualifications as a first-time buyer and take out $10,000 or less, you can use those funds toward a down payment without a 10% tax penalty if you close within 120 days. However, the actual withdrawal may still be considered taxable income.

One of the biggest tax breaks for a homeowner is the exclusion of capital gains when they sell their home. Capital gains are the profit from the sale of the home. For married couples, the first $500,000 in capital gains are not subject to tax. For individuals, the first $250,000 in capital gains are not subject to tax. “However, the home has to be used as one’s personal residence for two out of the last five years in order to get this tax break,” Rubinstein says.

Will Working From Home During COVID-19 Affect Your Taxes? For New Yorkers, Unlikely; For Other States, a Tax Battle Begins

February 19, 2021 By Asher Rubinstein, Esq.

Normally, working in New York City means that income tax will be due to New York State. This is true irrespective of whether the worker travels to the NYC job from the worker’s home within New York State or from home in New Jersey or Connecticut. New York State income tax is based on working at the job inside New York, even if one commutes to that job from one’s home outside New York State. If you live in NYC, you also incur NYC income tax.

But, what if you haven’t commuted to your job in NYC for many months because of the COVID-19 pandemic? What if your NYC office or employer has been closed and you’ve been working from home? What if you haven’t even set foot in NY State during the pandemic? What if your employer remains in NYC, but you’ve moved to Florida and work from home? Will you still have to pay income tax to NYS?

The answer is: Yes. You will still pay NYS tax if your employer is in NYS and you’ve been working from home, whether home is in New York or New Jersey or another state.

New York’s “Convenience of the Employer” Rule

The position of the New York State Department of Taxation is that for nonresidents whose primary office is in New York State, any days “telecommuting” during the pandemic are treated as days worked in the state unless the taxpayer’s employer has established a “bona fide employer office” at the telecommuting location. New York State has thus refused to adjust its state tax liability rules to account for the changing dynamic of working from home or “telecommuting” due to the COVID-19 pandemic.

In October 2020, the Department addressed the issue of nonresident withholding requirements for COVID-19 telecommuting. The guidance, posted on the Frequently Asked Question page of the Department’s website, provided that the same test established in 2006, the “Convenience of the Employer Test,” will apply in determining whether a taxpayer is subject to New York State income taxes when he or she is “telecommuting” due to COVID-19.

Because the Department’s recent guidance offers no special rules or exceptions relating to the COVID-19 pandemic, employees working from home because of COVID-19 will generally still be required to pay New York State taxes on income earned from a New York State employer, even if working from home outside of New York State. (Note, it is possible for the “bona fide employer office” requirement to be established. For example, if the employee’s duties require the use of special facilities that cannot be made available at the employer’s place of business, but those facilities are available at or near the employee’s home).

It is important to note that for purposes of New York State income tax, an employee’s home office is not the same as a “bona fide employer office.” Therefore, New York employers should continue to withhold New York State income taxes for their nonresident employees working from home, and such employees should expect to be subject to New York state income taxes.

NYC Income Tax is Based on NYC Residence

With regard to local income taxes, telecommuting has no effect on whether or not a taxpayer is subject to New York City Personal Income Tax (NYCPIT). This is because NYCPIT focuses strictly on residency, rather than the city or state in which the income was earned. Only NYC residents are subject to the New York City Personal Income Tax; nonresidents of NYC are not liable for NYCPIT (with one exception: employees of New York City Government agencies are subject to the NYCPIT regardless of their residency). Therefore, working from home due to the pandemic will not change a taxpayer’s NYC tax liability for purposes of the NYCPIT.

What if a taxpayer is a New York City resident but has lived and worked in her house in the Hamptons since the pandemic began? The answer depends on whether or not the taxpayer intended to change her residence, and there are different indicia of intent that will be examined in an audit. For instance, if the taxpayer kept her NYC apartment while living and working in the Hamptons, NYC income tax would likely still be due.

The following chart explains the tax implications for working from home:

The Tax Battles Between States Over Working From Home During Covid

The State of New Hampshire recently filed a lawsuit against its neighboring state of Massachusetts over a tax issue that has arisen from working from home during the COVID-19 pandemic.

Prior to the pandemic, residents of New Hampshire who worked for Massachusetts employers paid income tax to Massachusetts based on the number of days the New Hampshire residents worked within Massachusetts. If the New Hampshire residents worked from home, then Massachusetts would not tax income earned when working from home. If the New Hampshire resident worked from home one day each week, that would be a 20% reduction to the tax owed to Massachusetts.

But what if, as a result of the pandemic, the New Hampshire resident now works from home five days a week? Early into the pandemic, Massachusetts enacted a rule that froze the classification of income as sourced in Massachusetts, without regard to the new pandemic realities of working from home. As a result of the rule, the New Hampshire resident would only be allowed to deduct the same 20% as before the pandemic. Similar to New Jersey residents working from home and not setting foot in New York, New Hampshire residents are paying tax to Massachusetts when they no longer commute to work in Massachusetts.

New Hampshire has now sued Massachusetts over this issue, and the case will be heard by the United States Supreme Court. In one interesting argument, Massachusetts argues that the state of New Hampshire itself should not be allowed to sue as plaintiff, because any alleged harm is not to the state itself, but rather to the citizens of New Hampshire. Massachusetts also argues that it has always taxed non-residents on their Massachusetts-sourced income, and continues to do so, just as other states tax Massachusetts residents on income derived in those other states. This is the same reason why New York State taxes New Jersey and Connecticut residents on their income earned in New York State.

It is also interesting to note that New Hampshire, like Florida, Texas, and Nevada, does not have a personal income tax (but New Hampshire does tax investment income), which means that if New Hampshire wins the lawsuit, it would appear that its residents would not be taxed by either Massachusetts or New Hampshire on their “work from home” income.

The lawsuit between New Hampshire and Massachusetts is now before the United States Supreme Court. New Jersey and Connecticut, among other states, have filed briefs in support of New Hampshire’s position. The ultimate decision in this case will also affect whether New York can continue to reach beyond its borders to tax residents of other states who are working from home.

The COVID-19 pandemic has transformed the working world, as legions of people have been working from home and will continue to do so. In addition, multitudes of people have left New York City but remain tied to their NYC employers — meaning that they will continue to be taxed by New York State despite their relocation. Our tax and employment lawyers at Gallet Dreyer & Berkey, LLP continue to monitor the changing working dynamics and the resulting tax consequences and would be pleased to advise you.

End of Year Planning: Smart Strategies to Lower Income Tax

December 8, 2020 By Asher Rubinstein, Esq.

Our last post discussed end-of-year planning to lock-in estate tax savings, and get more to your family, before the tax law changes.

Here are some other strategies to consider now before taxes could go up in 2021:

Accelerate income (e.g., bonuses, exercise stock options) in 2020.
The Coronavirus Aid, Relief and Economic Security Act of 2020 allows a deduction of up to 100% of adjusted gross income (AGI) (up from 60%) for cash contributions to qualified charities.
Politicians have also warned that capital gains tax could potentially double. It may be possible for someone to pay more than 50% tax on capital gains: 39.6% federal income tax rate + 3.8% net investment income tax (under the Affordable Care Act) + 0.9% additional Medicare tax (Affordable Care Act) + 8.82% New York State rate = 53.12% !

Consider a Charitable Remainder Trust. Contributing appreciated assets, such as stock, family businesses and real estate to a Charitable Remainder Trust is a good way to avoid capital gains tax. The Charitable Remainder Trust is tax-exempt. It may sell assets free of tax and invest the proceeds tax-free. You can enjoy distributions from the trust at very low tax-favored rates, and at the end of the trust term, the remainder will go to a qualified charity. You will receive a tax deduction equal to the present value of the remainder that will be left to charity. The benefits: tax free growth of trust assets, a low-tax income stream for you and your beneficiaries, philanthropy of your choice, a charitable deduction and significant capital gains tax minimization. Benefits can be further enhanced by creating a tax-exempt family foundation to serve as the qualified charity receiving the remainder from the charitable trust.

In addition to lowering estate taxes and getting more to your heirs and less to the IRS, proper tax and estate planning also provides the following benefits:

Family governance and centralization of family assets
Legacy and succession planning (including family business and personal assets)
Income to beneficiaries
Specific family concerns and special needs children
Charitable considerations
Locking in “basis” for appreciated assets in uncertain fiscal times. This is especially important because Biden also campaigned on eliminating the “step up” in basis on appreciated assets. This would mean that your heirs would either pay tax on unearned appreciation, or would inherit your basis, resulting in a large capital gains tax when your heirs sell.
Gift tax planning
Asset protection and wealth preservation
Privacy
Estate tax minimization on the state level.

How to Use Current Law to Save Significant Taxes and Get More Money to Your Family, Less to the IRS. The Law May Change as a Result of the Election.

December 2, 2020 By Asher Rubinstein, Esq.

The current exemption from federal gift and estate tax is at an all-time high ($11.6 million per person), which you should utilize now, before the favorable opportunity is lost. This is a way to get more to your heirs, less to the IRS, relatively easily.

This exemption is scheduled to “sunset” in 2025, although Joe Biden campaigned to reduce the estate exemption to $3.5 million, and the gift tax exemption to $1 million, as soon as 2021. In addition, the gift and estate tax rate could increase to 45%. Any changes to the law could be retroactive to January 1, 2021.
The IRS has stated that it will not “claw back” gifts made today, if the exemption is reduced in the future.
This is a “use it or lose opportunity”. The exemptions have never been higher. Once the law changes, you will be limited to a much lower exemption from gift and estate tax.
Example: You own a family business worth $10 million. You gift it to your daughter in 2020. No gift tax is due. Instead, you gift it in 2021. Assuming a $1 million exemption and a gift tax rate of 45%, you would owe $4,050,000 in gift tax: $10 million gift – $1 million exemption = $9 million x 45% tax = $4,050,000 in tax due. Same business, same gift, new year, $4 million to the IRS.
If you’ve already gifted assets up to $5 million, you can now gift $6 million more, tax-free.
Consider making such gifts in trust, which could provide tax benefits, family governance and asset protection from creditors.
If you own a family limited partnership (FLP) or LLC, you can use discounted gifting to leverage even more than $11.6 million out of your taxable estate. Like calls to lower the gift and estate tax exemptions, politicians looking for revenue have also called for repealing the discounts on closely held entities like LLCs and FLPs. The strategy is currently available, legal and effective.
We have additional strategies to get assets to the next generation with fewer taxes: Grantor Retained Annuity Trusts (GRATs), Qualified Personal Residence Trusts (QPRTs), Charitable Remainder Trusts (CRUTs), Dynasty Trusts and others. These trusts can be used for estate tax minimization, capital gains tax minimization, family management and asset protection. Please see our article, here.

Please contact us for more information.

Recent Tax Law Changes and Challenges

December 26, 2019 By Asher Rubinstein, Esq.

The tax law changed significantly at the end of 2017, and by now we’ve had at least one tax year to consider and react to the new laws. We have previously written about some of the more important changes in the new tax law, e.g., pass-through deductions for S-Corps., LLCs and partnerships, and the increased standard deduction ($12,200 for single filers and married filers filing separately, $24,400 for married filers filing jointly). Contact us with any questions.

The following noteworthy events occurred in 2019 regarding the new laws:

Of significant concern to our clients in states such as New York, New Jersey and Connecticut, Congress put a limit on deductions for state and local taxes (“SALT”). Previously, these deductions were unlimited (although restricted under the Alternative Minimum Tax, AMT). Under the new law, taxpayers can only deduct up to $10,000 per tax return for SALT (i.e., a single filer has a $10,000 limit to the deduction, and a married couple filing jointly has the same $10,000 limit as the single filer).

We have been monitoring attempts to overcome this new law and preserve greater SALT deductions. Some local governments in 2018 attempted to convert local property taxes to charitable contributions which may then be deductible. The IRS in 2019 introduced regulations to bar such work-arounds. New York, New Jersey and Connecticut have sued to overturn the IRS rules, and the case is pending in federal court in the Southern District of New York.

In September 2019, a federal judge dismissed a lawsuit brought by New York, New Jersey, Connecticut and Maryland that challenged the $10,000 SALT deduction as a federal attempt to force local tax policies. The judge disagreed, stating that “the cap, again like every other feature of the federal Tax Code, is a part of the landscape of federal law within which states make their decisions as to how they will exercise their own sovereign tax powers.” For now, the SALT limitations are law.

The good news, however, is that the IRS stated that it would not challenge proper tax planning undertaken under the current tax law, once the law changes in 2025 (or earlier, such as following presidential and Congressional elections in 2020). “Individuals planning to make large gifts between 2018 and 2025 can do so without concern that they will lose the tax benefit of the higher exclusion level once it decreases after 2025,” the IRS stated in a press release. This gives an opportune cover. Contact us now to explore estate tax planning while the opportunity exists and has been blessed by the IRS. This should give clients the security to engage in proper tax planning without fear of IRS audit.

Recent Developments in International Tax Planning: The New “Economic Substance” Requirement

December 18, 2019 By Kenneth Rubinstein, Esq.

Recent initiatives by the Organization of Economic Cooperation and Development (OECD) are having a seismic effect on international tax planning. OECD “Action 5”, which has been adopted by almost all credible offshore financial centers (e.g., Cayman Islands, British Virgin Islands, Barbados, Bermuda, Bahamas, Liechtenstein, Isle of Man, etc.) requires all companies registered in a jurisdiction to have “economic substance” in that jurisdiction. “Economic substance” is generally defined as carrying on significant commercial activity – earning income, maintaining local physical assets, employing local personnel, performing local management and decision making. The effect of “Action 5” is the elimination of shell companies registered in foreign financial jurisdictions for tax avoidance purposes.

In addition, and of greater significance, the OECD “Anti-Abuse Campaign” has resulted in the elimination of tax-free international business companies (IBCs) as an element of international tax planning. In order to avoid inclusion on OECD black lists and grey lists (which results in exclusion from international commerce and banking) almost all foreign financial centers have adopted new tax regimes that impose at least a minimum income tax on all companies registered in their respective jurisdiction, irrespective of whether their income is earned domestically or from foreign sources (e.g., Barbados – 5.5%, Liechtenstein – 12.5%). The tax applies to income earned from commercial activities as well as investments, including capital gains, interest, dividends, rents, royalties and distributions.

The net result of these two initiatives is that generally, “tax havens” have been abolished. Every company will be taxed somewhere in the world. The initiatives are not, however, all-inclusive. Trusts are excluded, as are pure holding companies and certain commercial activities. The intricacies of the new foreign tax laws make the requirement for proper guidance from qualified tax professionals more important then ever before.

Legal and effective international tax strategies that take into account the new international landscape are available and can be evaluated and implemented by qualified tax counsel.

It is also important to note that the OECD initiatives have no effect on proper, tax-compliant, asset protection planning, which is not dependent upon secrecy or upon the various tax regimes of foreign financial centers. Foreign trusts, including asset protection trusts, are specifically not included in the OECD initiatives and continue to be tax-exempt under the new foreign tax regimes.

Achieving Tax-Free Life Insurance

November 7, 2019 By Asher Rubinstein, Esq.

If you own or control a life insurance policy, then the proceeds of the policy may be included in your estate at death and subject to estate tax. This comes as a surprise to many people who are under the impression that life insurance is tax-free. To avoid estate tax, we use an Irrevocable Life Insurance Trust (ILIT). We create an independent trust, with an independent trustee, who will own and control the insurance policy. Ideally, the trustee solicits and pays for the insurance policy with trust funds, and the trustee administers the trust and its insurance policy, including paying the premiums as they become due. Pre-existing Insurance policies may be conveyed to the insurance trust, but subject to a three-year look-back period (i.e., if the transferor of the policies to the trust lives for three more years, the trust is then said to own the policy fully and the policy will be removed from the taxable estate of the transferor).

When the insured person dies, the insurance company pays the proceeds of the policy into the trust. The trustee will then distribute the funds to the beneficiaries of the trust, who are usually the family of the insured. We can draft the trust with specific terms (e.g., mandatory distributions to pay for college; asset protection provisions to protect the trust from creditors and ex-spouses).

The tax savings are significant. The insurance policy is not considered to be within the estate of the insured (because an independent trustee owned, paid for and controlled the policy), and therefore not subject to estate tax. The receipt of the insurance proceeds by the trust beneficiaries is not taxable to them. In this manner, life insurance is tax-free.

There are many rules to understand and traps to avoid. For example, if a relative of first degree (spouse, sibling, parent or child) is named the trustee of the insurance trust, the IRS might argue that the trustee is too close to the insured and the insured is deemed to control the policy. The IRS may argue that the policy is still within the estate of the insured and the death benefit subject to estate tax. In addition, the trustee has to give annual notice to the beneficiaries of the trust, by what is known as a “Crummey” letter, named after an important court case. Experienced tax and estate planning attorneys can guide you through these requirements and tax traps.

We draft Life Insurance Trusts as part of comprehensive tax, estate and asset protection planning. Contact us for additional information.

It’s Tax Time Again – an Overview of the New Tax Law Changes

January 21, 2019 By Asher Rubinstein, Esq.

For U.S. based taxpayers, the due date for the 2018 federal income tax return (IRS Form 1040) is April 17, 2019. The IRS will begin to accept tax returns on January 29, 2019. For the 2018 income tax return, following the Tax Cuts and Jobs Act (TCJA) passed in December of 2017, taxpayers will experience the most significant changes to U.S. tax law since 1986.

Here are some of the more important tax changes that may be relevant to our readers and clients:

The top rate has dropped from 39.6% to 37.1%, and takes effect at $600,000 of taxable income for married couples (rather than $480,000). For single taxpayers, the top rate takes effect at $500,000 (rather than $427,000).

The standard deduction is now $24,000 per married couple and $12,000 for single taxpayers. Last year (for the 2017 income tax return), it was $13,000 and $6,500, respectively. This simplifies filing for many people, but eliminates the specific deductions for mortgage interest and charitable donations. This will affect purchases of homes, obtaining a mortgage and making charitable donations.

Of significant concern to our clients in states such as New York, New Jersey and Connecticut, Congress put a limit on deductions for state and local taxes (“SALT”). Previously, these deductions were unlimited (although restricted under the Alternative Minimum Tax, AMT). Under the new law, beginning for tax year 2018, taxpayers can only deduct up to $10,000 per tax return for SALT (i.e., a single filer has a $10,000 limit to the deduction, and a married couple filing jointly has the same $10,000 limit as the single filer).

We have been monitoring attempts to overcome this new law and preserve greater SALT deductions. Some local governments in 2018 attempted to convert local property taxes to charitable contributions which may then be deductible. The IRS has already indicated its opposition to such strategies. Some municipalities (e.g., Scarsdale, New York) have abandoned such attempts.

The estate and gift tax threshold has doubled to $11.2 million per individual and $22.4 million for a married couple. However, this increased threshold is currently set to lapse in 2025 and revert to prior exemption amounts (unless Congress acts to extend or make permanent these exemption thresholds).

The doubling of the estate tax exemption is a significant and rare opportunity to protect more assets from the reach of the estate tax and to instead pass on to one’s heirs. This opportunity, coupled with the IRS’ withdrawal of proposed anti-discounting rules, warrants consideration of family limited partnerships and leveraged gifting, dynasty trusts and other strategies to preserve assets and transfer wealth for your beneficiaries.

For divorce and separation agreements signed after 2018, alimony payments will no longer be tax deductible, and recipients of alimony will not have to report the alimony payments as income.

Pass-through business entities (including LLCs, S-Corps and partnerships) may now enjoy a deduction of 20% of net income, but subject to many new rules. For instance, the deduction is phased-out for taxpayers with more than $157,000 of income for single filers ($315,000 for joint filers) and does not apply to lawyers, doctors, accountants, consultants, investment advisors and owners of service businesses. The new rules are complex. Contact us for assistance.

Despite campaign promises to the contrary, the 3.8% surtax on net investment income (the so-called “Obamacare Tax”) was not repealed. This tax takes effect at $250,000 of adjusted gross income (AGI) for married taxpayers and $200,000 for single filers. As a result, taxpayers would owe 23.8% rather than 20% on long-term capital gains and dividends.

Other tax changes occurred for corporations and foreign income. We can help explain these (and other) new tax law changes, how they may impact your specific situation, and how to legally minimize your taxes. Contact us for a consultation.