Hi everybody,
It’s tax time for us accountants, but that is not what this post is about – well, not exactly. Actually, it’s to tattle on the law abiding (and crooked) spouses and apprise family law professionals of three income tax changes coming in 2011 that can affect spousal support and estate planning (aka dying expectations).
1. Depreciation Expense – It’s possible for businesses to buy and deduct up to $125,000 of the cost of business property (furniture, fixtures and equipment). Yes, there are some phaseout limitations, but it’s worth knowing about this IRS rule. Why? Haven’t you ever questioned the cause for that dip in earnings for that business owner spouse? Most of us look at the obvious answer– unrecorded cash. But maybe you should look below the top line and peek at the purchase depreciation expense. Some of it might be added back and included in cash flow, which in turn will increase income available for support to that giving spouse.
2. Social Security Withholding – Speaking of support, for 2011 only, the legislation reduced the rate for the Social Security portion of payroll taxes to 10.4% by reducing the employee rate from 6.2% to 4.2% (the employer’s portion remains at 6.2%). This translates to hundreds of dollars for each of your clients to use and spend on their support payments.
3. Estate Taxes – The government reinstated the estate tax, with an estate tax rate of 35% for estates over $5 million (adjusted for inflation after 2011). Your estate is not tax free to entitled children or heirs as it was in 2010, but it’s still cheaper to die now than it was only a few years ago.
With all this good tax news, I hope you all make lots of money and I wish you all Happy Holidays and a kind and healthy New Year.
Steven B. Garelick, CPA/ABV/CFF, CVA, CFS
MEDIATOR, COLLABORATIVE
email: SBGarelickCPA@gmail.com
tel (818) 601-4707 <<>> (626) 441-1040
fax (818) 884-2641 <<>> (626) 441-1090*
*Post updated to reflect Mr. Garelick’s new contact information.
