Estate Taxes in Trump's Administration and how Denver CPAs Can Help

When wealthy people die in Denver, or anywhere in the country, they must pay estate and gift taxes or pass their wealth onto their posterity. During the Obama administration, estate taxes owed by the wealthy increased. However, wealthy taxpayers were also provided substantial room to determine how much their estate was worth–possibly even at a diminished rate, in hopes of paying less taxes. This is an interesting tax that only Denver CPAs, like those with Net Prophet truly understands.

If President Trump has his way, this estate tax law will not go into effect. Trump is trying to rescind or modify this law, although this would take a vote in Congress.

How does this law impact the citizens of Denver?

As CPAs who works with estate taxes, the good news is, this law applies to only a tiny percentage of Americans. So much so that this law hardly even matters. Consider this fact: only 0.18 percent of those who pass away qualify for this tax law. According to the Census Bureau, out of the 2.7 million people who will die this year, only 11,000 will qualify for this tax, with only 5,200 actually paying this estate tax.

As part of the effort to eliminate this tax, there is a proposal to eliminate the “stepped-up basis” on unrealized capital gains, as well. “Basis” is the purchase price of a property. The basis is used to determine the gain, or loss, which is the taxable portion of the property, should that property ever be sold. In other words, the higher the property value, the higher the tax when sold.

 

It used to be that the “basis,” or purchase price, of an inherited property was stepped up or down according to the value of the property at the time of death. This allowed the property to be transferred without the receiver ever having to pay income tax on any increase in value. This was because it was felt that no one should have to pay both an estate tax and an income tax should the property ever be sold.

 

Should a repeal of the estate tax take place, the receiver will either acquire a step-up basis to the death date value or the basis will carry over, like what happens when a lifetime gift is passed along, meaning the basis does not change from the value it carried at the time it belonged to the giver. If this is the case, the amount of gain, and income tax, could increase if the property is sold. All in all, this is a complicated process for any Denver resident, with lots of intricate details, however, it is most wise to remember that this tax only impacts the wealthy. No American with less than five million dollars in assets qualifies for this tax. A well-informed CPA, like Net Prophet understands this complicated tax.

Should you have any questions about this tax, or any other tax questions, give Net Prophet a call today at