Is Obama Secretly Trying to Raise the Death Tax Again?

carrying casket

Democrats and Republicans have been battling over the estate, or death tax for decades. Democrats always push for a higher rate, while republicans would like to completely eliminate it. During the most recent Bush administration the death tax dropped from 55 percent to 45 percent and the threshold increased significantly. Families with assets of $675,000 or more were subject to the tax before president Bush took office. After Bush entered the White House, the estate tax was changed to affect only those families with assets of $10 million or more.

Valuation Discounts Under Fire

That was a big win for republicans but that doesn’t mean the current president is ready to give up on the issue. According to reports, the treasury department recently introduced new regulations aimed at limiting the ability of families to use valuation discounts in order to lower their estate tax liability when someone in their family passes away. A value discount is a great way to save because it enables families to reduce the taxable value of a given asset that doesn’t possess an extensive and commonly traded market. For example, if a person who owns a business worth $30 million wants to pass it on to his children when he or she dies the death tax would be applied to only $20 million after the $10 million exemption.

Holding Wealth Would Be Tougher, Taxes Higher

However, if a family cannot easily sell the business, or some of its assets, because a market does not exist for just a piece of the family-owned company, then its value is decreased. That’s why valuation discounts are so helpful, because they make it possible for a family to reduce the value of its business and thus better show its lack of marketability. So how would the Treasury’s new proposals affect the estate tax? In order to take full advantage of valuation discounts many family-owned businesses create limited liability companies (LLCs) or family limited partnerships (FLPs) so they can hold onto, and eventually transfer, their wealth for estate planning purposes. If the new regulations were to become law it would mean family-owned businesses would have a more difficult time using valuation discounts, which would most likely raise the death tax bill on families that try to hold onto and transfer their companies and their business’s wealth. This could also very likely wipe out jobs and slow the economy because these types of businesses would be broken up.

Still Time to Raise Your Voice

Despite the fact that Congress has continued to shoot down efforts to raise the estate tax and lower the threshold, President Obama is seeking to go around the House with this latest effort. However, there is still time for people to express their opinions on the matter. These regulations will not take affect until they are published as final regulations. In fact, the proposed regulations are subject to a 90-day public comment period, according to the U.S. Treasury Department, which means taxpayers have until December 1 of this year to express their thoughts and opinions.


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Three Ideas to Start Reducing This Year’s Taxes Now


Everyone wants to save on their taxes but many people don’t start thinking about tax savings until the next tax deadline rolls around. The real key to saving on taxes is to focus on those savings year round.

One of the best ways to legally save on your taxes, especially for the wealthy, is to harvest your losses. Of course, you face taxes on any capital gains made by selling investments. However, if you also have some capital losses from stocks that haven’t performed as well you can offset some, or perhaps all, of those gains. You can even use your losses to offset up to $3,000 in regular income if your losses are higher than your gains. You can also save some of your losses for the next tax year.

Another popular way to cut your tax bill is by setting up a flexible spending account through your employer. This account allows you to set aside pretax income for healthcare or dependent care expenses. You can then use that money throughout the year for bills you had already planned on paying and that money is tax-free.

Lastly, if you’re in the market for a home, or perhaps a second or third one, you should be aware of the tax benefits available to you. In addition to the deduction for the mortgage interest payment you can also get a tax break for your property taxes.

These are just a small sample of the ways you can start saving on your tax bill right now. Contact GROCO at 1-877-CPA-2006 or click here for many other tax-saving tips.

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How To Save on Taxes in Retirement

retired couple biking

If it’s time to retire and you haven’t started already to plan for taxes then you need to get started now. Even if retirement is still a ways off, you should always be thinking ahead. In any case, one of the most common question people have regarding retirement is how do I lower my tax bill? There are several things you can do that will help you keep your tax bill down after you retire.

One of your best bets is to open a Roth IRA. While these retirement accounts are created with after tax money, they also grow tax-free. Yes, you will have less expendable income when you deposit after-tax money into a Roth, but you won’t have to pay taxes on the gains you make when it comes time to withdraw the money. Another option is to simply convert some of your traditional IRA savings into a Roth IRA.

With all retirement accounts, at some point you will have to start taking money out, which is your required minimal distribution. However, if you don’t really need that money you can save on taxes by simply donating it to a good cause. In fact, you can donate up to $100,000 every year from a traditional IRA to charity.

You should also pay close attention to where you invest your money and make sure that you are putting it into the right kind of account. Having your income in the right place can help reduce your tax bill.

Lastly, although not an option for every taxpayer, you could move to a state with a lower tax rate. Florida, Texas and Nevada are some of the best options for those looking for a lower overall tax bill in retirement. However, there are many expenses to consider in retirement other than just your tax bill, so make this decision wisely, based on all the relevant factors.

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Some U.S. Businesses Not Happy With Obama’s Plan to Stop Inversions


In recent years tax inversions have become increasingly popular as several large U.S. companies look to lower their corporate tax bills. This process consists of a company shifting its headquarters from the United States to a foreign country, which helps it greatly reduce its taxes. While this practice is completely legal many lawmakers, including President Obama, have called for measures to stop it, or at least make it a lot less attractive.

In fact, the president recently announced more proposals to prevent the practice. However, many banks and companies are crying foul over the latest proposals, claiming that they would be complex and expensive. Democrats in Congress are all for the proposed changes, as they want to prevent U.S. companies from skipping out on their tax bills. However, republicans claim the rules would discourage foreign investment in the U.S. and that the Obama administration is overstepping its authority.

Meanwhile, according to several trade groups and businesses that represent the many different sectors involved, including retailers, bankers and manufacturers, as well as oil producers, have argued that the Treasury’s proposal to put a stop to deductions by reclassifying the debt as equity would only serve to disrupt their operations and weigh down their businesses with more regulations and unnecessary red tape.

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Tax-Free Spinoffs Could Be Much Tougher Under Proposed New Rules


Many U.S. companies take advantage of lower foreign taxes by creating tax-free spinoffs of their parent companies. It’s a great and legal way to lower their corporate tax bills. However, some lawmakers have long pressed for changes to these rules and it appears that changes could be coming.

The U.S. Treasury Department recently proposed some new rules that would make it more difficult for companies to create certain kinds for spinoffs. In order to avoid capital gains taxes on the transaction 5 percent of the amount of a spin-off must be an active trade or business.

The new proposed rules also aim to clear up the factors that determine when a spinoff cannot be used for distributing profits and earnings to shareholders. If the new rules pass, the transaction would be deemed a device if there was a large enough gap between the amount of the company that is made up of nonbusiness assets while the other company had a lot less.

At this point the new rules have only been proposed and they will not take effect unless the Treasury Department makes them official. Even at that time they still wouldn’t affect any transactions that were already planned before approval even if the transaction was finalized after.

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States to Avoid when Retiring

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Are you on the verge of retirement, or perhaps just a few more years away but you’re ready to start making some retirement plans? There are many things to consider when it comes time to retire, not the least of which where you choose to call home. For many people, the choice is easy; they just stay put where they’ve always called home. However, there are a lot of factors that go into this choice including children, grandchildren and of course taxes.

Speaking of taxes, if saving money is one of your top priorities, or the top priority, then you might want to consider closely where you live after you clock out for the last time. According to a report from Kiplinger you may want to avoid these 15 states if you want to save money and avoid more retirement expenses. These locations are not necessarily a bad place to live, but their tax and health care bills lack something to be desired, which is never easy for retirees.

15. Minnesota

14. West Virginia

13. Maine

12. Kentucky

11. Indiana

10. Wisconsin

9. Vermont

8. Montana

7. Rhode Island

6. Massachusetts

5. Illinois

4. Connecticut

3. California

2. New Jersey

1. New York

For most retirees, taxes are just one factor when it comes time to choose a place to live, but if you are serious about keeping your tax bill and your health care costs down then perhaps consider some other locations than the 15 states listed here.

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How Frugal Entrepreneurs Avoid Excess Spending and Taxes


Getting a business off the ground is never easy. It takes a lot of blood, sweat and tears, but smart entrepreneurs know that it also takes a lot of fiscal responsibility and the ability to say no. Most startup companies have to always be considerate and careful with their money. So what are some of the best moves to make to avoid overspending and to save on taxes?

It seems like such a simple thing, but a lot of companies end up spending much more than they need to on meal expenses. It’s great to buy your employees lunch on occasion, but don’t go crazy because it adds up fast and your business can only cover about half of your meal expenses.

Having a good credit card with positive rewards is another way to save. It can be a sky miles card or just a card with rewards points. If you put everything on that card the rewards add up and you can end up earning enough points or money to pay for other business expenses.

You can also use your business to pay for continuing education expenses, which is a much better option than taking out a student loan that you’ll be paying off for years to come. Another smart way to save is to hold onto proof of all your bad debt. If a customer doesn’t pay you for goods or services that you’ve fulfilled or completed keep the invoice and use it to show bad debt, which will lower your income and reduce your taxes.

It’s tough enough to start a new company, so make sure your entrepreneurial spirit equals your spirit of frugality. You’ll save money and have more resources to put back into your business.

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How to Ignite Your Inner Spirit to Pursue Your Passions

ignite your passions

We are all made up of a body and a spirit, or a soul. It’s our soul or spirit that really drives us to do everything we do. Our body is just the tool we use to carry out the desires and passions of our spirit. Many people think of a spirit only in religious terms, while others don’t believe in religion at all. However, whatever your beliefs there’s no arguing that we all have a spirit within us that motivates us to think, feel, act and live. Some people have no trouble finding the necessary passion or motivation to pursue their goals and dreams, while others find it much more difficult to find the drive it takes to be successful. So how can people ignite their inner spirit, which allows them to follow after their own passions and desires?

Don’t Let Logic Stop You

I asked this question to Prasad Kaipa when he joined me as a guest on my radio program, American Dreams. Among his many titles, Prasad is an executive coach, mentor, author and founder of the Centre for Leadership, Innovation and Change at the Indian School of Business. “When we are dreaming, when we are envisioning, we do not look at abstractions in making them happen. So first we need to learn to dream.” Prasad said that many times people let logic or certain data or statistics get in the way of having big dreams. He also pointed out that people should ask themselves not only what are they dreaming about, but also who they are dreaming them for? He said that being able to look outside of the box and not just focusing on one’s self, but rather expanding one’s horizon as far as possible, can be very powerful. That is the first step.

Follow Your Passion

The second step, according to Prasad, after you have been able to dream and envision what you want to create and why you want to create it is to passionately go after it. However, Prasad said you have to go after it the right way. “Don’t look it at like my project and it is all for myself, but keep remembering to enroll other people into your ecosystem to be part of it. You help them to make their dreams come alive and they will help you to make your dreams come alive.” That is where the enlightened self-interest, according to Prasad, will create significant results for both you and them.

Keep You Focus on the Passion Not the Outcome

Lastly, Prasad emphasized the importance of not getting too wrapped up in the outcome and the results. It’s important to detach yourself from the outcome and what the outcome means. Instead, he said you should focus on the passion, the process and the people. Do not get emotionally tied up with what you will do if you achieve the dream. “Detached engagement will give your role clarity and also make sure your ego gets out of the way.”

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Estate Planning for High Net Worth Foreigners

indian couple with lawyer

While the U.S. is considered by many to be a place where the wealthy move their money away from, there are also many wealthy people from other countries that are moving more of their money into our country. So what’s behind this big increase of foreigners shipping their wealth to the U.S.? America has never really been considered a tax haven, but thanks to an increase demand in multinational estate planning, the country is seeing an unprecedented number of immigrants either keep or shift their money to the U.S.

One of the biggest reasons for this increase is that U.S. tax law has almost completely eliminated estate transfer taxes. As more and more wealthy families from other countries want their children to receive an education in the United States, American colleges and universities continue to see an increase in the number of international students enrolling for classes.

Many of these students come to the U.S. and end up staying here for work, and many of them end up marrying a U.S. citizen. With their children and grandchildren now living in the U.S. many of these wealthy families are choosing to move more money to the U.S. in the form of trusts, which allows them to plan for their families and save on estate taxes.

Additionally, with the number of foreign students enrolled in U.S. educational institutions increasing to a record high of about 975,000 in 2104-2015, this trend is likely to continue.


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Windy City Tax Burden Will Hit NBA Star Hard


So how much is $47.5 million really worth? The answer is it all depends on where you live. Most of the NBA’s top free agents recently signed their new contracts, many with new teams, including former Oklahoma City Thunder Star Kevin Durant, who is now a member of the Golden State Warriors. No doubt all NBA players are very wealthy, of course, some more than others.

However, concerning free agent deals, the numbers aren’t always what they seem. Take for example the case of former Miami Heat star Dwyane Wade. Wade wanted a two-year $50 million deal from his former team, while the Heat offered a two-year $40 million contract. Ultimately, Wade decided to take his talents to the Chicago Bulls for a two-year $47.5 million deal. It’s a no-brainer right? That’s $7.5 million more than the Heat offered.

However, in choosing to move to Chicago Illinois, Wade will now be subject to a much higher tax rate. For starters, Florida has no state income tax. Illinois on the other hand has a 3.75 percent income tax, which means, Wade will owe close to $900,000 of his annual salary to the state. Additionally, Illinois does not give tax credits to resident athletes that pay taxes to other states for games played on the road. That means he will be double taxed for income earned in those games.

The city of Chicago also has some additional taxes that Wade will be subject to, all of which means his take-home pay could actually be about the same as it would’ve been had he signed for less total money with the Heat. So in the world of NBA contracts and taxes, the numbers aren’t always as they seem.

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