The recently passed Inflation Reduction Act replaced the proposed Build Back Better Act. It covers many topics, and it is challenging to determine what will affect you. It is now a bill of law, and while the name suggests it is meant to focus on inflation, there are other areas of concern. You will also want to know how it will affect your Estate Planning but more on that later. First, let’s review some of the bill’s highlights.
Key Provisions of the Inflation Reduction Act
The Corporate Minimum Tax Rate
Tax rates on individuals and households will see no change, but corporations making a minimum of $1 billion of income will now face a 15% tax rate.
Prescription Drug Price Reform
Medicare beneficiaries will now pay less for medications because medicare can negotiate the prices of prescription drugs. Not all prescription medications fall under the rule, but many do. Additionally, starting in 2025, there will be a $2,000 annual cap on out-of-pocket costs for medications.
IRS Tax Enforcement
The IRS will receive $80 billion over the next 10 years in funding to circumvent its current complaints of being underfunded.
ACA Subsidy Extension
The Affordable Care Act had subsidies set to expire at the end of 2022. These subsidies are now extended through 2025. That means nearly three million Americans will keep their benefits.
Energy Security and Climate Change Investments
Homeowners will now get additional tax credits for households that offset energy costs. The goal is to produce clean energy.
If you have questions about the Inflation Reduction Act and how it impacts your Estate Plan, speak to an experienced South Florida Estate Planning Attorney at Siegel Law Group today.
Estate Planning In Florida and What Is Not In The Inflation Reduction Act
After a quick review, you might realize there is not anything that seems to correlate with Estate Planning directly. The Build Back Better Act did include some provisions for high-net-worth Estate Planning that are not in the Inflation Reduction Act:
- Increase on top marginal income tax rates
- Reduction in small business stock gain exclusion
- Decrease in estate transfer tax exemption
- Charges to grantor trust rules
- Increases to top long-term capital gain rates
None of these provisions are in the Inflation Reduction Act and therefore do not apply to your Estate Planning. The IRS budget can affect your Estate Planning because a substantial amount of that money is going to tax enforcement. The higher the enforcement rate, the more audits there will be.
Estate Planning is a vital part of your financial management. It protects you, your dependents and your property when you die. Read more about updating your estate plan if you recently moved to Florida.
The term refers to the share of an investment’s future and how it will be paid to one of its partners. Before the Inflation Reduction Act, partners would pay lower taxes for holds of at least three years. The income rate would increase if partners held these assets over three years.
With the inflation Reduction Act, the holding period is extended to five years. It only applies to taxpayers making over $400,000, and those who make less would continue to use the old tax rules. Carried interest is essential because it can affect home and property sales. It is best to work with a South Florida Tax Attorney to ensure you are abreast of the tax codes.
What About Other Bills?
It is unlikely any other bills will go into law this year regarding Estate Planning and taxes. However, the Tax Cuts and Jobs Act will expire at the end of 2025 if there are no extensions. You should stay alert to the passing of the SECURE Act 2.0 since that will change how a retirement account is handled upon the owner’s death.
Contact An Experienced South Florida Estate Planning Attorney
The Inflation Reduction Act as passed will have little impact on your Estate Plan, but federal and state laws are constantly changing. A South Florida Estate Planning Attorney can help with several items like Wills, Healthcare Surrogate Designations and Power of Attorney. We also have critical Health Care Planning services during times of change. Contact Siegel Law Group at 561-576-6206 to schedule a complimentary consultation.