Some interest rates are going up, others are holding steady and a few more are going down. It’s quite the volatile week.
Today we’ll look at four things you need to know in 2014 for estate tax planning,
Estate Tax in 2014: 4 Things You Need to Know
The Motley Fool is reporting that no matter how much you earn or are worth, you should look into planning your estate carefully. In 2014, there will be four main things you should be aware of with estate taxes:
- Higher exclusions will apply to the estate tax in 2014. Congress agreed to set the level at which estate taxes kick in at $5.25 million, avoiding expiring provisions that would have sent the exclusion down to just over $1 million. And one of the biggest improvements in the estate-tax laws is that the exclusion amount was set to adjust with inflation.
- What’s included can surprise you. The biggest surprise for many people is that life insurance proceeds are often included in taxable estates even if the benefits go directly to beneficiaries rather than passing through the estate’s probate proceedings. So talk with a professional.
- It’s easier for married couples to preserve their full estate tax benefits.Another good thing to come out of the recent legislation is that couples no longer have to worry about losing part of their joint exclusion amount in the event of their untimely death.
- State limits for estate tax in 2014 can differ markedly from federal limits. Many states also charge estate taxes, and some of them have much lower limits at which their taxes apply
End of mortgage-fix break could mean big tax bills
CNN ran a story about how a tax break for people struggling with mortgage payments ends on January 1, 2014.
If a mortgage holder was able to get some of the debt forgiven by having some principle forgiven, they weren’t taxed on it thanks to when Congress passed the Mortgage Foreclosure Debt Forgiveness Act in 2007. Unfortunately, that law is set to expire at year’s end, and the forgiven debt will now be taxed as income.
Consumer advocates consider the tax unfair: “The money being taxed was ‘phantom income’ that existed only on paper,” said Elyse Cherry, CEO of Boston Community Capital, a non-profit, neighborhood stabilization group.
It will also damage foreclosure-prevention efforts, said Cherry. Many at-risk homeowners could not participate in programs if a big tax bill accompanies the fix.
If you’re thinking of making updates to your mortgage, or getting a new one, now is the time to talk to your mortgage loan officer and see what you can lock down before December 31 when a lot more changes will happen.