You have probably been overwhelmed by the amount of news and discussions surrounding the new tax law that was passed in December. The biggest question facing most business owners involves what to do in light of this new law. Here are a few things you should know:
•This new law only applies in certain instances to 2011 or 2012. Make sure you know which benefits apply to which years so that you don’t miss some savings.
•This law does not provide a “permanent” solution. Most likely, there will be another frantic push at the end of 2012 to address what the law in 2013 will be.
•Married couples have the ability to transfer up to $10 million of property without federal gift tax. Individuals can transfer up to $5 million without federal gift tax. The amount you can transfer to grandchildren (better known as “generation skipping transfers”) free of the generation skipping transfer tax has also been increased to the $5 million per individual. Make those big gifts now!
•Because of the gift tax credit, estate planning that uses life insurance owned by trusts should be considered by anyone who has or expects to have more than $1 million in net worth.
•Bonus depreciation and accelerated expensing for certain assets make 2011 a great time to buy!
•For 2011 only, employees get a payroll tax break of 2 percent (up to $2,136 per person).
•Consider using a C corporation for a new business and have the opportunity to sell the stock in the future with no federal income tax due (subject to certain limitations)!
•If you own a corporation that converted from a C corporation to an S corporation, consider how the continued 15 percent dividend tax rate may help you plan. Likewise, if you own a C corporation, consider how that rate may help you plan.
Content provided by Wishart, Norris, Henninger & Pittman, P.A., which partners with owners of closely-held businesses to provide comprehensive legal services in all areas of business, tax, estate planning, succession planning, purchases and sales of businesses, real estate, family law, and litigation. For more information, contact Robert Norris at 704-364-0010 or visit www.wnhplaw.com.