Latest news with #TaxCutsAndJobsAct
Yahoo
13 hours ago
- Business
- Yahoo
6 Ways To Keep Your Estate Taxes Low
Estate planning isn't the sexiest topic on the planet, but it's worth thinking about as you're deciding how to pass on assets onto your beneficiaries. Sure, you want to ensure that your wishes are honored, making plans on keeping your estate taxes as low as possible. Discover More: Read Next: Fidelity, one of the largest financial institutions in the U.S., suggests that you consider these six factors as you work out how to keep estate taxes low. The first three have to do with how estate taxes could affect your heirs, whereas the others are more directly tied to helping you lower them. Right now, you might not have much to worry if taxable assets in your estate are under $1.399 million if you're single, or $27.98 million for married couples. However, the Tax Cuts and Jobs Act (TCJA), enacted in 2017, is set to expire by the end of 2025. Unless changes are made, the exemption for estate taxes will go down to about half the amount, adjusted annually for inflation. Even if you believe your estate is much smaller than around $5 to $6 million, you never know if by the time you pass away, you'll have that amount. Think about it: After adding up other assets like vehicles and balances in various retirement accounts, your estate could easily get close to or above the tax exemption threshold. Check Out: Your state may have different laws when it comes to your estate. Some may have lower tax exemption thresholds. For example, Iowa, Pennsylvania, Nebraska, and New Jersey have an inheritance tax on all assets inherited by beneficiaries. The amount of inheritance tax paid will depend on their relationship with you. Other states have much lower exemption amounts. Kentucky, for example, is $1,000, whereas Oregon's is $1 million. Even if you're well under the estate tax exemption in your state, it may be higher in the future. Your home value rises over time. If you don't expect to have your heirs inherit your property for decades, the increase in value could bump it up well past those exemptions. It might be a smart idea to take stock of all the assets you plan on giving to your beneficiaries and be aware of how much estate taxes may be taken out. Donating part of your estate to a qualifying nonprofit or charitable organization can help to lower your estate's value, and therefore lowering the amount of estate taxes that may be owed. A common way you can do that now is by opening and contributing to a donor advised fund. The money in the account can be used towards charitable donations. There may be some exemptions as to how much you can contribute to this type of account, and other taxes you may be on the hook for such as capital gains tax. Consult with an accounting or tax professional to help you. A 529 account is a type of investment account where you name a beneficiary and funds can go towards their qualifying educational expenses. Money held in this account is generally not considered part of your estate, as long as it's held there for at least five years. Giving some of your money now to your children or heirs could lower your estate's value, and therefore lower the amount of estate taxes that may be owed. If you go this route, plan out how much you want to give now and how it can affect what you'll need to live on now and during your retirement years. You'll also want to understand how much you can gift before the amount is considered taxable. In 2025, the gift tax exclusion is $19,000, or $38,000 for married couples. More From GOBankingRates Warren Buffett: 10 Things Poor People Waste Money On This article originally appeared on 6 Ways To Keep Your Estate Taxes Low
Yahoo
3 days ago
- Business
- Yahoo
Dave Ramsey: Millennials and Gen Zers Want the Child Tax Credit To Be $5K — How This Would Impact Your Wallet
A new survey by Ramsey Solutions found that millennials and Gen Zers want the child tax credit (CTC) to be increased to $5,000. Some respondents claim this increase would have an impact on their decision to have children. For younger Americans facing high costs of living, student loan debt and stagnant wages, this kind of financial relief could help make parenthood feel more attainable. Discover More: Try This: However, a bigger tax credit doesn't just affect new or future parents; it could have ripple effects across generations. Here's why younger generations are rethinking parenthood, and how it could impact your wallet. Also find out how you can qualify for the child tax credit. According to the IRS, the (CTC) allows eligible taxpayers to reduce their federal income tax bill by up to $2,000 per qualifying child. Under the Tax Cuts and Jobs Act, the CTC is set to drop back to $1,000 after 2025 if Congress doesn't take any action. If passed, President Trump's 'One, Big, Beautiful Bill' would make the $2,000 credit permanent and raise the cap to $2,500 through 2028, after which the value would return to $2,000 and adjust for inflation. There are no plans to increase the amount beyond these figures, but Ramsey Solution's The State of Personal Finance report for the fourth quarter of 2024 found that 45% of millennial and Gen Z respondents say increasing the CTC from $2,000 to $5,000 per child would have a 'significant or moderate impact' on whether or not they decide to have children. Find Out: Millennials and Gen Zers have delayed parenthood due to financial pressures, including rising housing costs, childcare expenses and concerns about economic uncertainty. The most recent report from the U.S. Department of Agriculture, based on 2015 data, estimated it costs over $233,000 to raise a child through age 17, not including college. Given inflation and rising living costs, the actual figure today is likely even higher. According to a 2024 survey by Pew Research Center, six in 10 respondents said providing free child care would encourage more people to have children. Respondents also supported requiring employers to offer paid family leave, expanding tax credits and issuing monthly payments to parents of minor children. A larger child tax credit could offer relief to families raising kids, but that money has to come from somewhere. And the financial impact wouldn't be limited to parents alone. The Joint Committee on Taxation (JCT) estimates that a permanent expansion of the CTC with the added boost would cost $880 billion over the 10-year period. That kind of long-term spending raises questions about how the government would cover the cost, whether through higher taxes, increased borrowing or cuts to other federal programs. For older generations, including Baby Boomers and Gen Xers who are no longer raising young children, some could see their tax burden increase or face reduced investment in programs they rely on, such as Medicare or Social Security. Younger generations could also feel the impact. Since the expanded credit would not apply to them, they may still face higher taxes or reduced access to other federal services if offsets are needed to fund the program. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 5 Cities You Need To Consider If You're Retiring in 2025 10 Unreliable SUVs To Stay Away From Buying This article originally appeared on Dave Ramsey: Millennials and Gen Zers Want the Child Tax Credit To Be $5K — How This Would Impact Your Wallet 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
CNN
3 days ago
- Business
- CNN
Trump is counting on economic growth to offset his tax cuts. But his big, beautiful bill likely wouldn't deliver, experts say
President Donald Trump and congressional Republicans are promising that their sweeping tax and spending cuts package will usher in an era of historic economic growth. 'This is going to be jet fuel,' House Speaker Mike Johnson said on NBC's 'Meet the Press' earlier this month. 'The reason we call it the Big, Beautiful Bill is because it is a tremendous pro-growth package entwined in this legislation that is going to make everybody's incomes go up.' But a multitude of economic experts across the ideological spectrum doubt that's going to happen. In fact, many argue that the Trump agenda megabill that narrowly passed the House last month would provide even less economic oomph than his 2017 Tax Cuts and Jobs Act – and the jury is still out on how much economic growth that earlier tax cut package spurred. While independent estimates vary somewhat, most find that the House-passed package would only give a small nudge to economic growth and fail to offset its trillions of dollars of tax cuts. The reason: The 'Big, Beautiful Bill' wouldn't provide substantial long-term corporate tax relief, which drives economic expansion. The Senate version, a portion of which was released Monday, would make several business tax provisions permanent, which would increase the bill's economic growth potential but also its cost. But the two chambers would still need to hammer out their differences on these and other provisions. And growth estimates for the Senate bill have yet to be released. The megabill's main focus is to extend the roughly $4 trillion in TCJA individual tax cuts that are set to expire at the end of this year. The House-passed package would also expand some of the measures, such as a four-year enhancement to the child tax credit, and aims to fulfill several of Trump's campaign promises, including temporarily eliminating taxes on tips, overtime and auto loan interest. On the corporate tax side, the package would restore a tax break from the 2017 package that allowed businesses to fully write off the cost of equipment in the first year it was purchased. The incentive has been phasing out since 2023. Also, the legislation would once again allow businesses to write off the cost of research and development in the year it was incurred. The TCJA required that companies deduct those expenses over five years, starting in 2022. The two provisions would expire after 2029. The bill would also allow companies to immediately deduct the cost of constructing or making improvements to certain types of buildings, including manufacturing plants, through 2028. These corporate tax breaks would prompt businesses to invest and expand in the next few years, but the incentives are temporary and won't prompt long-term economic growth, said Will McBride, the Tax Foundation's chief economist. What's missing is the massive business tax break – the permanent reduction of the corporate tax rate from 35% to 20% – contained in the TCJA, which some experts argue drove the economic growth in that package. According to the right-leaning Tax Foundation, the tax provisions in the House-approved bill would boost the economy 0.8% over about three decades – compared to its estimate of 1.7% for the 2017 bill. Increased revenue from economic growth would offset about 22% of the current bill's tax cuts. Still, the package would increase the federal budget deficit by $1.7 trillion over 10 years, even taking its roughly $1.5 trillion in spending cuts into account. 'We look at the bill and kind of shrug our shoulders and say, 'You could have done better on growth',' said Daniel Bunn, the foundation's president. Similarly, the Penn Wharton Budget Model forecasts that the overall House bill would give a 0.4% boost to the economy by 2034, but the deficit would grow by $3.2 trillion over that period. Penn Wharton estimates that the deficit impact would increase when taking the economic effects into account because some lower-income households would reduce their hours worked to requalify for Medicaid coverage and some higher-income people would work less because of their gains from the bill's tax breaks. The Trump administration argues that these independent analyses are wrong. 'So called 'experts' panning The One, Big, Beautiful Bill, without a smidge of self-awareness, should remember that they made these same exact gloomy predictions about President Trump's tax cuts during his first term,' Kush Desai, a White House spokesman, said in a statement to CNN, adding that the TCJA 'helped usher in historic job, wage, investment, and economic growth.' The Congressional Budget Office has yet to release its analysis that takes the House package's economic impact into account. A separate CBO analysis forecasts the bill would increase the deficit by $2.4 trillion over a decade, not accounting for economic growth. One way to boost the economic growth potential of the package would be to make the business tax breaks permanent, some experts say. The Senate Finance Committee version of the bill calls for making several of the provisions permanent. For instance, the temporary corporate tax breaks for equipment and for research and development would cost $60 billion over a decade, but making them permanent would increase the price tag to $507 billion, according to the Committee for a Responsible Federal Budget estimate, which was calculated prior to the Senate Finance Committee proposals were released. Penn Wharton forecasts that making permanent the temporary business tax provisions and other time-limited measures in the House bill would increase the deficit after taking the economic impact into account. Higher levels of federal debt can reduce incentives for private investment, which typically spurs more economic growth. Providing subsidies for new commitments is a much more efficient way to encourage growth than cutting the corporate rate since companies only get the benefit if they invest, said William Gale, co-director of the Urban-Brookings Tax Policy Center. 'Making the investment provisions permanent would be a pro-growth move relative to almost anything else in the bill,' Gale said, though the increase in deficit and other measures in the legislation could negatively affect private investment.
Wall Street Journal
04-06-2025
- Business
- Wall Street Journal
Full Expensing Boosts Economic Growth
The most efficient way for Congress to unleash economic growth is to establish full and permanent expensing—a policy allowing businesses to deduct immediately the cost of their investments in capital assets including machinery, equipment and buildings. The 2017 Tax Cuts and Jobs Act tried to achieve this goal, but its provision excluded investments in factories and other buildings and began phasing out in 2023. Republicans must not make the same mistake again. The 'one big, beautiful bill' recently passed by the House includes full expensing, but it would expire at the end of 2029. The Senate should make this provision permanent. The Tax Foundation estimates that this would increase America's long-run gross domestic product by 1%.
Bloomberg
22-05-2025
- Business
- Bloomberg
A Guide to Trump's Tax Cuts: What's in His ‘Big, Beautiful' Bill
On May 22, the US House of Representatives passed a multi-trillion dollar bill that implements President Donald Trump's domestic agenda. The legislation would extends the tax cuts implemented in Trump's first term, which were set to expire, and allocate billions of dollars to defense, immigration enforcement, and other administration priorities. The measure now moves to the Senate, which is expected to make significant changes. Here's what to know. The bill would extend most of the individual and estate provisions of Trump's 2017 Tax Cuts and Jobs Act, which are largely set to expire at the end of 2025. Those include increases to the standard deduction, a fixed dollar amount that reduces the income on which a person is taxed; lower income tax rates for most taxpayers; an increase in a tax credit that can be claimed for a dependent child; a deduction for privately held businesses; and a doubling of the amount that an individual can leave to their heirs upon death without incurring federal estate taxes.
