The White House released their FY 2015 budget earlier in March. These are some of the significant tax items that have been proposed.
Estate Tax – In 2012, the estate tax exemption was made “permanent” at $5 million and the tax rate was set at 40 percent. (This is only permanent until there is another change in the tax law.) Additionally, the exemption is indexed for inflation annually. The White House has proposed to change the estate exemption to $3.5 million with a maximum tax rate of 45 percent. Furthermore, the proposal does not subject the exemption amount to inflation.
Business Section 179 Expensing – The White House has proposed to make permanent the Code Section 179 dollar limit at $500,000 with a $2 million investment limit. For 2014, the dollar limit is currently set at $25,000 with a $200,000 limit. The White House has not proposed to extend the bonus depreciation limits which expired December 31, 2013.
Small Employer Health Insurance – The White House’s proposal would expand eligibility of the small employer health insurance tax credit. Currently, only businesses with up to 25 full time employees qualify. This would expand eligibility to businesses with 50 full time employees. The White House budget would also simplify the calculation to determine the credit.
UNICAP Rules – The budget would exempt businesses with sales of $10 million or less from the UNICAP rules.
R&D Tax Credit – The budget proposes to make the research tax credit permanent.
1031 / Like-Kind Exchanges – The White House proposes to limit the amount of capital gain that can be deferred under a 1031 exchange of real property to $1 million per taxpayer per year.
LIFO Repeal – The White House has proposed to repeal the Last In First Out method of accounting for inventories. Existing reserves would be taken in to income over a period of ten years.
Minimum Required Distributions – The budget has proposed that minimum required distributions would be eliminated for individuals whose retirement accounts do not exceed $100,000 in total. Also, the proposal would apply the minimum required distribution rules to Roth IRAs.
Inherited IRA’s – Non-spousal beneficiaries of IRA’s and retirement plans would be required to take distributions of the inherited amounts over a period of 5 years.
Limitations on Itemized Deductions – The White House has proposed to place a cap on the value of itemized deductions at 28%. For high income tax payers in the 33%, 35% and 39.6% tax brackets, their deductions will have reduced value.
Alternative Minimum Tax II – The proposed “Buffett rule” would be the second alternative minimum tax whereby taxpayers with Adjusted Gross Income in excess of $1 million would pay a minimum tax rate of 30 percent.
If you have any questions about this article, please contact Jamie Downey at 800-849-6022 or JMDowney@DowneyCoCPA.com.
