James F. McDonough
Of Counsel
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New York Gov. Andrew Cuomo has led a well-publicized push to simplify the Empire State’s tax code. As of the stroke of midnight on April 1, the estate tax exemption doubled to more than $2 million, according to Crain’s New York Business. As per the budget agreement reached over the weekend, the state’s tax exemption will rise by more than $1 million every year until April 1, 2017, at which point it will pause at $2.52 million. On Jan. 1, 2019, the exemption will then rise to match and keep in line with the federal exemption, which is currently $5.34 million and indexed to inflation.
The New York estate tax reform will exempt 90 percent of the households in the state who would have paid the tax under the previous $1 million exemption. But, this is predicted to cost the state significantly less in tax revenues, as the majority of the revenue comes from the top estates, which are taxed at 16 percent, the news source explained. Estate tax planners have called the move a step in the right direction, but continue to voice reservations.
One such problem that planners have with the law is the so-called “tax cliff” that it creates, according to a comment letter written by The New York State Society of CPAs. Those that have just 5 percent more than the 2017 exemption will be subject to a marginal tax rate of almost 164 percent, because the entire estate will be taxed, as opposed to the funds in excess of the exemption. Therefore, an estate 5 percent over the $5.25 million exemption, faces an effective tax of $430,050 on the additional $262,500.
Despite this new quirk in the tax law, New York is now emphatically a better place to die.
- Practices: Tax and Trusts & Estates
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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