inflation adjustments

Estate and Gift Tax 2018 Inflation Adjustments

On October 19th, the IRS issued Revenue Procedure 2017-58, the annual inflation adjustments for 2018 for many tax provisions, including exemptions for estate, gift and generation-skipping transfer (GST) taxes as well as the annual exclusion amount for gifts as follows:

Estate, Gift and GST Tax Exemption Increases to $5,600,000. For estates of decedents who pass away during 2018, and for gifts made during 2018, the combined estate and gift tax exemption will increase to $5,600,000, up from a total of $5,490,000 for estates of decedents in 2017.  The generation-skipping transfer exemption increased as well to $5,600,000. In 2018 an individual can bequeath $5,600,000 (or $11,200,000 from a married couple’s estate) to heirs and pay no federal estate or gift tax.

Gift Tax Annual Exclusion Increases to $15,000. For gifts made in 2018, the gift tax annual exclusion will increase to $15,000 from $14,000, where it has been since 2013. An individual can give to another individual up to this amount without utilizing any of the gift tax exemption.  For example, a married couple can gift each donee up to $30,000 in 2018 without utilizing either spouse’s gift tax exemption amount.

If you have any questions about the inflation adjustments, we are available to answer your estate and gift tax questions at or contact us here.


Year-End Tax Planning Strategies

As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next.

We have compiled a checklist of actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you will likely benefit from many of them. We can narrow down the specific actions that you can take. In the meantime, please review the following list and contact us if you would like additional advice on which tax-saving moves to make:

Year-End Tax Planning Moves for Individuals

  • If you expect to owe state and local income taxes when you file your return next year, consider making an estimated tax payment before year-end to pull the deduction of those taxes into 2017 if you won’t be subject to alternative minimum tax (AMT) in 2017. Pulling state and local tax deductions into 2017 would be especially beneficial if Congress eliminates such deductions beginning next year.
  • Take required minimum distributions (RMDs) from your IRA or 401(k) plan (or other employer-sponsored retirement plan). RMDs from IRAs must begin by April 1 of the year following the year you reach age 70-½. That start date also applies to company plans, but non-5% company owners who continue working may defer RMDs until April 1 following the year they retire. Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. Although RMDs must begin no later than April 1 following the year in which the IRA owner attains age 70-½, the first distribution calendar year is the year in which the IRA owner attains age 70-½. Thus, if you turn age 70-½ in 2017, you can delay the first required distribution to 2018, but if you do, you will have to take a double distribution in 2018—the amount required for 2017 plus the amount required for 2018. Think twice before delaying 2017 distributions to 2018, as bunching income into 2018 might push you into a higher tax bracket or have a detrimental impact on various income tax deductions that are reduced at higher income levels. However, it could be beneficial to take both distributions in 2018 if you will be in a substantially lower bracket that year.
  • Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes. The exclusion applies to gifts of up to $14,000 made in 2017 to each of an unlimited number of individuals. You can’t carry over unused exclusions from one year to the next. Such transfers may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.
  • If you were affected by Hurricane Harvey, Irma, or Maria, keep in mind that you may be entitled to special tax relief under recently passed legislation, such as relaxed casualty loss rules and eased access to your retirement funds. In addition qualifying charitable contributions related to relief efforts in the Hurricane Harvey, Irma, or Maria disaster areas aren’t subject to the usual charitable deduction limitations.

Year-End Tax Planning Moves for Businesses & Business Owners

Businesses should consider making expenditures that qualify for the business property expensing option. For tax years beginning in 2017, the expensing limit is $510,000 and the investment ceiling limit is $2,030,000. Expensing is generally available for most depreciable property (other than buildings), off-the-shelf computer software, air conditioning and heating units, and qualified real property—qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. The generous dollar ceilings that apply this year mean that many small and medium sized businesses that make timely purchases will be able to currently deduct most if not all their outlays for machinery and equipment. What’s more, the expensing deduction is not prorated for the time that the asset is in service during the year. The fact that the expensing deduction may be claimed in full (if you are otherwise eligible to take it) regardless of how long the property is held during the year can be a potent tool for year-end tax planning. Thus, property acquired and placed in service in the last days of 2017, rather than at the beginning of 2018, can result in a full expensing deduction for 2017.

Businesses also should consider making buying property that qualifies for the 50% bonus first year depreciation if bought and placed in service this year (the bonus percentage declines to 40% next year). The bonus depreciation deduction is permitted without any proration based on the length of time that an asset is in service during the tax year. As a result, the 50% first-year bonus writeoff is available even if qualifying assets are in service for only a few days in 2017.

Businesses may be able to take advantage of the “de minimis safe harbor election” (also known as the book-tax conformity election) to expense the costs of lower-cost assets and materials and supplies, assuming the costs don’t have to be capitalized under the Code Sec. 263A uniform capitalization (UNICAP) rules. To qualify for the election, the cost of a unit of property can’t exceed $5,000 if the taxpayer has an applicable financial statement (AFS; e.g., a certified audited financial statement along with an independent CPA’s report). If there’s no AFS, the cost of a unit of property can’t exceed $2,500. Where the UNICAP rules aren’t an issue, consider purchasing such qualifying items before the end of 2017.

Businesses contemplating large equipment purchases also should keep a close eye on the tax reform plan being considered by Congress. The current version contemplates immediate expensing—with no set dollar limit—of all depreciable asset (other than building) investments made after Sept. 27, 2017, for a period of at least five years. This would be a major incentive for some businesses to make large purchases of equipment in late 2017.

If your business was affected by Hurricane Harvey, Irma, or Maria, it may be entitled to an employee retention credit for eligible employees.

A corporation should consider deferring income until 2018 if it will be in a higher bracket this year than next. This could certainly be the case if Congress succeeds in dramatically reducing the corporate tax rate, beginning next year.

These are just some of the year-end tax planning steps that can be taken to save taxes. If you would like us to start planning particular steps that will work best for you, contact us here.

© Copyright 2017. All rights reserved.


Trump’s Framework for Fixing Broken Estate, Gift, Trust Tax Code

At first glance, the Framework that President Trump has outlined for the Estate Tax is simply this: repeal of the Estate Tax and its cousin, the Generation Skipping Transfer Tax (GSTT).   The complexity lies in the rich political history behind the Estate Tax, in what little details are provided, and what the Framework does not say.   In this brief article we will alert you to the important details, point out the silent mysteries, and provide you with some direction for planning in this uncertain environment.

The proposed Framework repeals the Estate and GSTT, but under the Byrd rule the Estate Tax could be reinstated after a 10 year period.    You may recall precisely this outcome when the Estate Tax was repealed for just one year, in 2010. Thus, if your life expectancy is more than 10 years, and your assets are worth more than about $5,500,000, the proposal may offer little or no relief at all.

Historically when the Estate Tax has been repealed (as recently as 2010), it is replaced by a modified capital gains tax on assets held at death, payable when the heir sells the asset.   The Framework gives us no hint whatsoever if this might be the future for America.   Thus, if you should die in the 10 year period, it is entirely unclear whether or not your assets will be subject to a capital gains tax, and when that tax might be due.

The Framework repeals a very valuable income tax deduction for Estate Tax paid on income-producing assets, like inherited retirement accounts and inherited promissory notes.   This could cause an asset inherited from a decedent who died prior to repeal to pay both Estate and Income Tax on the asset, resulting in a total tax rate of about 75%!

The framework is also silent about how Trust and Estate Income Tax rates would change.   Currently Trusts and Estates are faced with the highest Income Tax burden of any entity!   There is no hint in the framework about relieving Trusts and Estates of their high rates, though there is discussion in the framework of eliminating deductions, like investment interest.   Thus, enactment could result in a substantial increase in Income Tax under the proposal.

In addition, the Framework is silent about the Gift Tax, though Trump advocated repeal during his candidacy.

What you can do to protect your assets, your business, and your heirs:

Many taxpayers are more concerned about the continuity of their businesses and avoiding making their heirs into “Trust Babies” than the effect of estate taxation. No matter what the Estate Tax regime might be, it is important that your Estate Plan provide for these non-tax issues.   Thus, estate planning is as important as ever!

With regard to navigating through the uncertain tax regime, tools like 10 year Grantor Retained Annuity Trusts and Qualified Personal Residence Trusts payable to Grandfathered GSTT Trusts during the 10 year repeal may provide the best of both worlds: If you die during the repeal term, the assets are not subject to Estate Tax. If you die after the term, all or a portion of the assets will escape the Estate Tax and GSTT.   These are just two of the many tools that could be implemented during these uncertain times.

Since 1916, the Estate Tax Exemption has changed more than 30 times!   Last year, certain Regulations involving transfers of businesses were proposed, and just recently re-withdrawn. One thing you can bet on: Uncertainty is a certainty!

We have guided our clients through hundreds of Estate Planning transactions resulting in millions of dollars in savings. We remain ready to point you in the right direction.   Please contact us at to see how Wright Ford Young & Co. can help you!

© Copyright 2017. All rights reserved.

By Cheryl J. Schaffer, CPA, MST, AEP® and Kevin Wiest, CPA, MST

Wright Ford Young & Co.

Estates and Trusts Partners


What to Do After the Hurricane

Those pictures you see from Hurricane Harvey and Hurricane Irma – ordinary people out there in waist-high water, rescuing both their neighbors and strangers, coming from other states and other counties – demonstrate yet again not only the resilience of Americans but our decency in reaching out to others without a thought to personal safety.

It also makes us all think: What would I do if such a natural disaster were to strike my home or business? What follows are the resources available, especially if you are in Texas or Florida. Even if you’re not in this area, you may have friends and family who are, so be sure to share this with them.

Start with FEMA

  • Federal Emergency Management Agency (FEMA) contact info for assistance — allows you to apply for assistance online. When you go to the website, you will see a link for transitional assistance, which lists hotels so you can find a safe place to stay.
  • You can also call 800-621-FEMA (3362). Contact your state’s emergency management agency to find out about other resources and to get your county’s contacts. The site helps with a link to a US Hospital Finder and even temporary lodging, including Airbnb, through its Disaster Response Program.

Massive property damage translates into tens of thousands of insurance claims. Most homeowners’ and renters’ insurance policies cover wind damage but not groundwater flooding. The distinction between actual flooding and storm-driven water damage can be subtle but may have important insurance implications.

While FEMA offers grants to victims, it admits that the amount is often much less than what is needed to recover.

The region affected by Harvey is underinsured — only one-sixth of homes in Harris County, Texas, whose county seat is Houston, have active National Flood Insurance policies. There are about 1.8 million housing units altogether.

What about businesses? Small businesses may be eligible for a disaster loan program through the Small Business Administration.

Based on statistics like these, it’s expected that a large portion of overall economic damage caused by flooding won’t be covered by insurance.

The Next Steps

What to do:

  1. Contact your insurance company as soon as possible to report your claim. Insurers visit the most severely damaged areas first, so be prepared to provide an accurate description of any damages.
  2. Get a claim number and write it down — it’s the quickest and easiest way for insurance companies to locate your file.
  3. Ask when you can expect to see a claims adjuster. It can be anywhere from a week to five or six months, depending on the extent of the claim.
  4. Document losses with pictures and video. Include a list of damaged personal items. Try to include the date of purchase and approximate value of any damaged items, and collect receipts. Put all of this into the cloud so it can be accessed anywhere.
  5. Keep good records of anything you spend to make immediate repairs to secure your home — don’t forget receipts from hotels and meals if you couldn’t return to your home right away.
  6. Sign up for text alerts that notify you of the status of your claim.

Other important tips:

  • If you have flood insurance, notify your provider within 60 days of damage. The National Flood Insurance Program has a step-by-step guide on how to file your flood claim.
  • Only cover broken windows or holes to keep rain out and prevent theft — don’t make permanent repairs until instructed to by your insurance company. Save all receipts.

Expect a check within five business days after your insurance company agrees to pay your claim.

Also notify your mortgage company and auto loan lender — monthly payments may be deferred for a period of time and late fees typically are waived because you’re living in an area impacted by a natural disaster.

Your area may lack power not only for days but for weeks. You may have to purchase food, medical supplies and other necessities using cash instead of credit or debit cards. Areas without power revert to a cash-only economy. Many banks and credit unions will set up mobile branches open beyond typical banker’s hours so that affected consumers can access cash or easily apply for loans needed to repair damage.

Notify your utility and cable companies so bills will be halted. You may even want to notify the three credit bureaus and the Federal Trade Commission to have a fraud alert placed on your accounts to lower the chance of becoming a victim of identity theft. Creditors often are willing to negotiate a payment plan and review your budget.


Moving Forward With Insurance

Once you get your immediate issues taken care of, you will probably have a lot of back-and-forth with the insurance company over the coming weeks and months. Here is what you can expect:

Unfortunately, even with the combination of FEMA, homeowners and flood coverage, not all repair costs will be paid — there will be gaps when trying to make your home the way it was before the hurricane hit. Damage caused by even a few inches of water in a 1,000-square-foot home can easily cost more than $10,000 to repair.

Insurance companies typically provide additional living expenses for hotels and meals if you can’t live in your house or conduct business while repairs are being made. You should expect to shell out your own money first, but you’ll be reimbursed for expenses within 30 days. Companies will reimburse for sump pumps, generators or supplies like wood for do-it-yourself repairs. Filing claims as soon as you can is smart just to get your name on the list. It will help you get the most from your benefits. Find out what your policy provides beyond the immediate benefits.

With some companies, you may have to do some negotiating with your adjuster about the extent of damage to some possessions. Realize, too, that the insurance company’s estimate of how much it will cost to repair your home and your own contractor’s figures may not be anywhere near comparable. Either a compromise can be hammered out or you can get a mediator to break the impasse, but that process can lengthen and complicate the rebuilding process.

Advice? Start by trusting the company, but do so warily and professionally. Keep notes of conversations and copies of correspondence and receipts. If you run into trouble with the claims department, see if there is a complaint resolution department.

Details on Tax Help

The IRS has announced that it’s providing help to victims of Hurricanes Harvey and Irma. Here are some specifics:

  • The agency is waiving the diesel fuel penalty for all of Texas in the aftermath of the hurricane. Penalty relief is provided for partnerships that filed late returns. The IRS has even offered extension filers until January 31 to file.
  • If you have a business in one of the counties that were hit hard, you may qualify for tax relief, including abatements. Quarterly estimated tax payments, as well as quarterly payroll and excise tax deposits, will be abated as long as the deposits were made by September 7. If you receive a late filing or late payment penalty notice anyway, call the IRS to have the penalty abated.
  • Know that the IRS is automatically identifying taxpayers in covered disaster areas and applying automatic filing and payment relief. But if you have a business outside the covered disaster area that was nevertheless affected, you may still be eligible for relief. Call the IRS disaster hotline at 866-562-5227 to request tax relief.
  • And what about claiming disaster-related casualty losses on your federal income tax return? You may deduct personal property losses not covered by insurance or other reimbursements. Put the disaster designation ”Texas, Hurricane Harvey” or ”Florida, Hurricane Irma” on top of your form so the IRS can expedite the processing of your refund.

Other Helpful Resources

Assistance for your business is available through a link, Other Recovery Help, accessed from Here you will find a heading that says Catalog of Federal Domestic Assistance, and if you click on it, it will allow you to search programs by state, local and even tribal entities, as well as profits and nonprofits that offer assistance.

There is a link to a National Resource Network that is composed of a diverse group of private and public sector organizations to help distressed cities and counties find and apply solutions to aid economic recovery and growth:

  • Support for implementing solutions.
  • Access to peer network and new ideas.
  • Online, on-demand access to expertise.

FEMA offers a Community Recovery Management Toolkit that can be used to find local officials and community leaders who will help manage long-term and post-disaster recovery. The toolkit offers guidance, case studies, tools and training. The information is in four sections:

  • Organization.
  • Recovery Planning.
  • Managing Recovery.
  • Core Capability-Specific Resources.

The online help offers are many and heartening. They remind us that when overwhelming disaster strikes, we’re all in it together, working alongside each other and crossing all regional boundaries. When the worst hits us, ironically, it brings out the best in us.

© Copyright 2017. All rights reserved.