Latest news with #tax law
Forbes
4 days ago
- Business
- Forbes
Simple Mistake Costs Estate Big Tax Break
The portability of the lifetime estate and gift tax exemption amount between spouses was introduced in the 2010 tax law. But details of portability aren't well-known, and misunderstandings can cost an estate a lot of money. Each individual has a lifetime exemption from the estate and gift tax, which is $13.99 million in 2025 and will rise to $15 million in 2026. After that, it will be indexed for inflation. When one spouse dies and his or her estate doesn't use the entire lifetime exemption, the unused exemption amount can be passed to the surviving spouse. The surviving spouse then has an estate and gift tax exemption equal to his or her own exemption amount plus the unused amount of the deceased spouse. The surviving spouse's exemption amount is increased for inflation each year. But the unused amount from the deceased spouse isn't increased for inflation. The transfer of the unused amount is known as portability, though that term isn't used in the tax code or regulations. Because of portability, it's frequently said that a married couple has an estate and gift tax exemption amount of twice the individual exemption amount. But that's not the full story. It's often overlooked that passing the unused exemption amount to the surviving spouse isn't automatic. The regulations require the estate executor of the first spouse to die to elect to pass on the unused exemption. If the election isn't made, the unused exemption amount doesn't pass to the surviving spouse. The election is made when the executor makes a timely filing of an estate tax return for the deceased spouse. No special document or language is needed to make the election. The IRS considers the portability option to be elected if an estate tax return is filed, unless there's a statement saying that the unused exemption amount isn't being transferred to the surviving spouse. To transfer the unused exemption amount, the estate tax return must be filed even if one isn't otherwise required and the estate's value is far less than the deceased spouse's exemption amount. That's the trap estates fall into. The executor sees that the estate's value is far less than the deceased's exemption amount and doesn't file an estate tax return because one isn't required. But not filing the return means the unused exemption amount doesn't pass to the surviving spouse. Also, if an estate tax return is filed to ensure the unused exemption passes to the surviving spouse, the return must be timely, complete and accurate. Otherwise, the transfer of the exemption amount is void. An estate recently learned these lessons the hard way. The wife passed away with an estate valued at less than the exemption amount. The executor obtained an extension of the deadline for filing the estate tax return. But the executor didn't file the return until well after the new deadline. The husband died two years after the wife. His executor filed an estate tax return claiming his exemption amount plus the unused portion of the late wife's exemption. The IRS denied the use of the late wife's exemption amount, and the Tax Court agreed. The wife's estate tax return wasn't properly filed, because it was late. In addition, required information was missing, such as an itemization of the estate's assets and the fair market values of the assets on the date of her death. If there's any possibility a surviving spouse's estate might exceed that spouse's lifetime exemption amount at some point in the future, the executor of the estate of the first spouse to pass away should file an accurate, timely estate tax return to preserve any unused exemption amount for the surviving spouse. When deciding whether to exercise the portability election, keep in mind that the estate tax exemption amount is indexed to the Consumer Price Index. It's possible that the rate of return on investments will exceed the CPI. That could cause an estate that's comfortably below the estate exemption amount to exceed the amount after a decade or more of compounding. (Estate of Rowland v. Commissioner, T.C. Memo 2025-76)
CNN
27-07-2025
- Business
- CNN
New rules for how much you can deduct in charitable contributions
If you regularly make donations to tax-exempt charities and non-profits, you should be aware of upcoming rule changes governing how much of your contributions will be deductible. Some of the changes, which are in President Donald Trump's recently enacted federal tax-and-spending cuts package, affect filers who take the standard deduction. Others affect filers who itemize — which you do when your individual deductions combined exceed the standard. Here's a rundown of some key changes that will take effect in 2026: In the first two years of the pandemic, if you took the standard deduction on your federal income tax return, you also were allowed to deduct an additional $300 ($600 for married couples filing jointly) for charitable cash gifts you made. That special provision then expired. But, starting in 2026 you will be allowed to deduct up to $1,000 in cash donations ($2,000 for joint filers). 'This applies only to direct cash gifts to qualifying 501(c)(3) charities — not donor-advised funds or private foundations,' said Tom O'Saben, director of tax content and government relations at the National Association of Tax Professionals. Starting in 2026, those who itemize their deductions will — for the first time — be allowed to deduct their cash contributions only to the extent they exceed 0.5% of their adjusted gross income. For example, say your adjusted gross income is $100,000. You will be allowed to deduct the amount of your total cash gifts minus $500 (0.5% of $100,000. So if you make $2,000 in cash contributions, you only will be allowed to deduct $1,500. An existing rule that further limits itemizers will remain in effect: It sets a ceiling for how much you may deduct of your contributions to public charities in a given year. Specifically, you can't deduct the portion of your cash donations that exceed 60% of your AGI in the year you make them, O'Saben said. (The AGI limit is typically 30% for cash gifts made to donor-advised funds and private foundations, he added.) But you may be able to deduct any cash gifts you made outside the allowable limits in the next tax year. That's thanks to another existing rule that lets itemizers carry forward their 'excess' contributions for five years and deduct them on future returns. The 'excess' is any portion of your cash donations that exceeds the AGI ceiling and, starting next year, falls below the new floor of 0.5% of AGI. Say your AGI is $100,000 next year. You will be allowed to carry forward the first $500 of your cash gifts (0.5% x $100,000) plus any remainder of your donations above $60,000 (60% of your AGI). Lastly, O'Saben noted, 'You cannot double-dip. If itemizing, you're not eligible for the $1,000/$2,000 deduction, as that's reserved for non-itemizers.' The value of one's deductions for anyone whose taxable income puts them in the top tax bracket of 37% will be treated as if they were in the 35% bracket. Here's how that will work: Say you itemize and are allowed to deduct $10,000 in cash donations after accounting for the new 0.5% of AGI rule above. Typically, the itemized charitable deductions will reduce your tax bill by an amount equal to your top tax rate multiplied by your deductible cash donations. But if you're in the 37% bracket, you won't get the full $3,700 (37% x $10,000) in tax savings. You will reduce your tax liability by only $3,500 (35% x $10,000), O'Saben explained. If you itemize, any non-cash contributions you make – such as clothes, food or household goods – are also subject to the new 0.5%-of-AGI floor. If you're taking the standard deduction, you won't be able to deduct your non-cash contributions since the $1,000/$2,000 limit for non-itemizers applies only to cash gifts.
Yahoo
12-07-2025
- Business
- Yahoo
Trump Tax Law Quietly Takes Aim at Popular Perk: Office Snacks
(Bloomberg) -- The SkinnyPop in the break room may not last. Donald Trump is targeting the office snack. Singer Akon's Failed Futuristic City in Senegal Ends Up a $1 Billion Resort Why Did Cars Get So Hard to See Out Of? Can Americans Just Stop Building New Highways? How German Cities Are Rethinking Women's Safety — With Taxis Philadelphia Trash Piles Up as Garbage Workers' Strike Drags On The president's signature tax law allows a long-standing business deduction for the cost of food provided to employees to expire, imperiling a workplace perk popularized during Silicon Valley's dot-com boom that is now an emblem of modern office culture. A well-stocked pantry is now a staple at Wall Street banks, among other places. US companies that continue to provide office snacks, coffee or on-site lunches will see them taxed after Dec. 31, when the deduction will be eliminated. The tax change gained little attention as the sprawling, nearly 1,000-page legislation moved through Congress and it isn't yet clear how companies will respond. A spokesperson for Goldman Sachs Group Inc., which provides employees $30 stipends for 'out of hours' meals and a pantry stocked with complementary coffee and snacks, declined to comment on what the company will do when the tax deduction ends. So did a spokesperson for Meta Platforms Inc., another company known for employees' ready access to free food and coffee. Spokespeople for for Alphabet Inc.'s Google didn't respond to requests for comment. Far from Wall Street and Silicon Valley, Alaska's fishing industry was spared from higher-cost noshes. The state's fishermen earned a carve-out in a bid to keep Alaska Senator Lisa Murkowski's support for the overall bill, which squeaked by only with Vice President JD Vance casting a tie-breaking vote. No such luck for Maine's lobstermen, whose senator, Republican Susan Collins, didn't vote for the legislation. Restaurants will also be able to deduct the cost of employee meals, a long-standing tradition for kitchen and wait staff. But that will no longer be the case for most other employers, including factories and hospitals, many of which also offer workers free or subsidized meals or snacks. Eliminating the deduction is projected to raise $32 billion in additional taxes on employers through 2034, according to Congress's Joint Committee on Taxation. Free food has become broadly entrenched in workplaces, with 44% of US employers now providing free snacks, double the rate a decade ago, according to surveys conducted by the Society for Human Resource Management. Free office pantries and cafes have been celebrated in recent decades for encouraging employees to work longer hours, boosting morale and sparking creative collaboration through chance encounters. Google co-founder Sergey Brin has been widely quoted as instructing his office designers to assure no employee was more than 200 feet away from food. Trump's 2017 tax law halved the deduction for employer-provided food and scheduled it for elimination at the end of this year, as the administration sought to lower that law's budget impact when a host of breaks expired Dec. 31. The new tax legislation Trump signed on July 4 rolled back most of the year-end scheduled tax increases but maintained elimination of office snack-deduction, except for the Alaska and restaurant carveouts. Still, Ali Sabeti, chief executive officer of ZeroCater Inc., a San Francisco-based corporate catering company whose more than 1,000 clients include major banks and tech companies such as Roku Inc. — said he doesn't expect to lose business as a result. The catering company didn't lose clients in 2017, when the deduction was reduced to 50%, he said. 'It's pretty inelastic,' Sabeti said. 'When you take a tax deduction away, the cost is going to go up, but companies will continue to spend, just like if you took away a deduction on a laptop.' Trump's Cuts Are Making Federal Data Disappear 'Our Goal Is to Get Their Money': Inside a Firm Charged With Scamming Writers for Millions Will Trade War Make South India the Next Manufacturing Hub? Soccer Players Are Being Seriously Overworked Trade War? No Problem—If You Run a Trade School ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
12-07-2025
- Business
- Bloomberg
Trump Tax Law Quietly Takes Aim at Popular Perk: Office Snacks
The SkinnyPop in the break room may not last. Donald Trump is targeting the office snack. The president's signature tax law allows a long-standing business deduction for the cost of food provided to employees to expire, imperiling a workplace perk popularized during Silicon Valley's dot-com boom that is now an emblem of modern office culture. A well-stocked pantry is now a staple at Wall Street banks, among other places.
