Where Not To Die In 2022: The Greediest Death Tax States

Should death be taxing? Amid budget surpluses, states started slashing income taxes last year. But only two have made significant changes to their estate or inheritance taxes so far. Last year Iowa legislators decided to phase out the state’s inheritance tax by January 1, 2025. And this year Nebraska legislators made pro-taxpayer tweaks to its inheritance tax for deaths occurring on or after January 1, 2023.

Other jurisdictions have lessened the tax bite for dying in 2022—through previously scheduled changes or inflation adjustments. But some, without inflation adjustments, are still taxing estates at levels that haven’t budged for years, meaning more families are getting surprise death tax bills. In one of those states—Massachusetts—Democratic legislators are pushing for changes to spare more estates from the tax as part of a broader tax reform package this summer.

In all, 17 states and the District of Columbia levy estate and/or inheritance taxes. Maryland is the outlier that levies both. If you live in one of these states—or might retire to one—pay attention.

These taxes operate separately from the federal estate tax, which applies only to a couple thousand estates a year valued at over $12.06 million per person. (That number is set to drop roughly in half on January 1, 2026, when the Trump tax cuts that temporarily doubled the base exemption from $5 million to $10 million expire.) While few individuals need to plan around the federal estate tax, the state levies all kick in at much lower dollar levels, often making it a middle class problem.

Consider the current state estate tax in Massachusetts. The $1 million estate tax exemption hasn’t been adjusted for inflation since 2006, so it can hit the heirs of middle class folks who have seen their houses and retirement accounts appreciate.

“You can be real estate rich with a modest home, and your estate could be subject to this,” says Scott Cashman, a tax manager with Bowditch & Dewey in Worcester, Massachusetts. “It’s becoming more of an issue every year.” If the $1 million exemption amount set in 2006 had been adjusted for inflation, it would be closer to $1.5 million today.

Say a widow or widower died with a house worth $535,000, a $200,000 bank account, a $350,000 retirement account, and a $15,000 car, for a $1.1 million gross estate. Assuming $50,000 in deductions, the estate tax would be $20,500, he calculates.

(There’s no estate tax when assets are left to a spouse, but in this case the heirs are children.) If the house is worth $1 million, however, the tax would be $65,360— one third of the cash in the bank. Adding to the pain is what’s known as the cliff: Once the $1 million mark is crossed, the estate tax applies to everything over $40,000. “I don’t know if most legislators understand that,” he says.

A bill introduced by Democratic state senators would double the Massachusetts exemption amount to $2 million and only levy tax above that amount, removing the dreaded cliff. “We have such a surplus now, this is the time to do it,” says Cashman. “There’s broad-based support for reform.”

Inheritance taxes—levied in 6 states—can kick in at far lower levels, with the exemption and tax rate depending on the heir’s relationship to the deceased. In New Jersey, for example, if you leave your estate to a Class D beneficiary—including a nephew or non-civil-union partner—they’re taxed at 15% on assets up to $700,000 and 16% on assets above $700,000.

In Nebraska, lawmakers this year fell short of inheritance tax repeal but succeeded in chipping away at the state’s inheritance tax. The new law, effective Jan. 1, 2023, cuts the top tax rates (from 18% to 15%, for example) and increases the exemption amounts (from $10,000 to $25,000, for example). It also eliminates inheritance taxes for heirs under 22, and it makes unadopted step-relatives taxed at the lower rate for nearer family members and not the higher rate for unrelated heirs.

“Lawmakers wouldn’t agree to a general phase-down of the tax at this point that would apply to everyone, but they were willing to accept that if a younger person were to inherit property or cash (and we can use a lot more young residents and entrepreneurs in Nebraska) that it’s not in the state’s economic interest to take any of it away from them,” says Adam Weinberg, communications director with the Platte Institute, which is continuing its effort to repeal the inheritance tax in Nebraska.

Meanwhile, Connecticut, the least taxing of the estate tax states, is on schedule to increase its exemption to $9.1 million in 2022, and then to match the federal exemption for deaths on or after January 1, 2023. In an unusual nod designed to keep the richest taxpayers in the state, Connecticut has a $15 million cap on state estate and gift taxes (which represents the tax due on an estate of approximately $129 million).

Other states with 2022 changes: Washington, D.C. reduced its estate tax exemption amount to $4 million in 2021, but then adjusted that amount for inflation beginning this year, bringing the 2022 exemption amount to $4,254,800. Several states, which all have set their exemption amounts at different base levels, also see inflation adjustments for 2022. Maine’s is $6,010,000, while New York’s is $6,110,000. In Rhode Island, the 2022 exemption amount is $1,648,611.

I cover personal finance, with a focus on retirement planning, trusts and estates strategies, and taxwise charitable giving. I’ve written for Forbes since 1997.

Source: Where Not To Die In 2022: The Greediest Death Tax States

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5 Reasons Why Property Stocks Remain Attractive

It’s a well-known fact that Singaporeans love property. Before the pandemic, it was common to hear of hordes of people thronging condominium showrooms where units are snapped up like hotcakes.

While the pandemic has eliminated these throngs, the property market continues to remain buoyant. Last month, 99.co and SRX reported that condominium resale prices climbed for the 15th consecutive month, hitting a new all-time high.

The rental markets for HDB flats and private property also benefitted from Singapore’s economic recovery, with condominium rents climbing by 9.1% year on year in October. But it’s not all good news for investors. 

Physical property requires heavy upfront capital and constant upkeep. Property-related stocks, on the other hand, offer an alternative, acting as a proxy for owning physical capital and can easily be accessed through the stock market.

REITs and property stocks are breathing a sigh of relief as economic activity picks up. As an investor, you may wish to take a second look at property-related stocks as they offer some compelling characteristics. Here are five reasons why they are attractive.

1. A scarce resource

No matter how you cut it, land is a scarce resource in our tiny island. That’s the reason why the government has been trying to maximise the space by building higher and increasing the plot ratio for properties. Property developers such as CapitaLand Investment (SGX: 9CI) and City Developments Limited (SGX: C09) that own land banks have a valuable asset on their balance sheets.

And REITs such as Frasers Centrepoint Trust (SGX: J69U) and Mapletree Commercial Trust (SGX: N2IU), which owns a portfolio of heartland retail malls and retail cum commercial properties in Singapore, respectively, are sitting on a veritable gold mine. By buying into such companies and REITs, investors can indirectly own a piece of valuable real estate.

2. Tax exemptions

Companies naturally are obliged to pay corporate taxes to the taxman at the current rate of 17% on their chargeable income. REITs, however, have a distinct advantage in this area. As long as they pay out at least 90% of their earnings as distributions, REITs are exempted from paying income taxes.

In addition, investors also do not need to pay income taxes on dividends received from both REITs and property developers. So, REIT investors win on two fronts as their distributions are completely exempted from income tax. Contrast this with owning an investment property where the property tax rate stands at 10% of the annual value of the property.

3. Easy to transact

Selling physical real estate can be a tedious process. You will need to engage a property agent and lawyer, and get in touch with the banker who offered you the mortgage. Not to mention the property is also an illiquid asset that may take weeks or even months to dispose of.

In contrast, property stocks and REITs offer much less hassle. As they are listed on a stock exchange, you can easily transact through the platform. The market is also fairly liquid and you can obtain your cash much more quickly should you sell. All you need is a stockbroker to facilitate the transaction.

4. Piecemeal holdings

When you’re dealing with physical property, you can’t sell it off piece by piece. It’s impossible to just, for example, sell off the dining room while retaining the rest of the property. For property-related stocks, though, you can choose to sell all or part of your shareholders.

This ability to transact in piecemeal fashion provides you, the investor, with much more flexibility.

5. An external manager

Owning an investment property comes with a set of responsibilities including maintenance and tenant management. You have to periodically check in on the property to ensure it is in good condition and also liaise with your tenant on rent collections. If the unit is vacant, you have to expend the effort to locate a suitable replacement tenant or else your cash flow dries up.

On the other hand, REITs appoint a manager that takes care of all the above, and the portfolio will be professionally managed by a competent team of staff.

The REIT manager’s duty is to ensure the properties are occupied and well-maintained, and that all tenants pay up on time. You can thus outsource the management of the properties to a competent manager who has your best interests at heart. Stay tuned for another five reasons as to why we believe property stocks are a great asset class to own!

First-time investors: We’ve finally released our beginner’s guide to investing. Read it in an afternoon, follow the principles, pick an investing style and buy your first SGX stocks within the next few hours! Click here to download it for free.

By: Royston Yang

Source: https://thesmartinvestor.com.sg/

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E.g. Corporation Tax Act 2010s 519 in the UK. See A. O’Sullivan (2006),

“Residential shut out fears for UK Reits played down after German move”. CityWire.

“What is a REIT?”. reit.com. Retrieved 4 December 2014. Green, Richard K.; Rhea, Parker.

“Listed and Non-Listed Reits: Exploring the Cost Difference” (PDF). USC Lusk Center for Real Estate. University of Southern California. Retrieved 13 December 2018. Moskowitz, Dan.

“REIT Regulation 101”. Investopedia. Retrieved 11 January 2019.

“Guide to Equity REITs”. reit.com. Retrieved 4 December 2014

. “Guide to Mortgage REITs”. reit.com. Retrieved 4 December 2014.

“Real Estate Slated for Eleventh Headline Sector in GICS®”. reit.com. Retrieved 4 December 2014.

“The Most Important Metrics for REIT Investing”. Simply Safe Dividends. Retrieved 16 March 2021.

“REIT 50 Years Timeline”. Reit.com. Archived from the original on 2012-11-13. Retrieved 2012-12-18. Section 10(a) of Public Law no. 86-779, 74 Stat. 998, 1003-1008 (Sept. 14, 1960), enacting Internal Revenue Code sections 856, 857 and 858.

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“SEC News Digest” (PDF). “Securities and Exchange Commission. 1977-03-21.

“History of REITs & Real Estate Investing”. Retrieved 24 February 2021.

“Global Real Estate Index Launches”. Retrieved 24 February 2021.

“Investing in Listed Real Estate – IPE Reference Hub”. Retrieved 24 February 2021.

“FTSE Russell Factsheet:FTSE EPRA Nareit Global & Global ex US Indices”. FTSE. Retrieved 25 February 2021.

“What Higher Rates Mean for REITs”. U.S. News & World Report. 8 June 2018.

“Screening For High-Yielding High-Quality REITs”. Forbes. 5 July 2018. “Keeping it Real Estate”. PodBean. 29 June 2018. Pleven, Liam.

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“Global REIT Survey 2012: Hong Kong”. Global REIT Survey. European Public Real Estate Association (EPRA). Archived from the original on 2013-05-17. Retrieved 2013-02-27.

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“Arun Jaitley’s Budget 2014-15 promises big push to real estate and the first company to trade is always now existing”. “Better late than never! Investors finally lap up Indian REITs & InvITs”. “History Timeline of J-REIT History”. Retrieved 25 February 2021. Stooker, Richard (2011).

REITs Around the World: Your Guide to Real Estate Investment Trusts in Nearly 40 Countries for Inflation Protection, Currency Hedging, Risk Management and Diversification. “Japan-based REITs have dumped over half their US stocks: report”. The Real Deal. 31 October 2018.

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“Breaking News, World News & Multimedia”. nytimes.com. Retrieved 15 March 2018. Nordberg, Antton.

“The Future of REIT in the Philippines”. KMC MAG Group. Inc. Retrieved 11 May 2015. Endo, Jun (2 March 2021).

“Philippines’ young REIT market snubbed by foreign investors”. Nikkei Asia. Retrieved 17 June 2021. “AREIT, a trailblazer in the country’s REIT path”. Philstar.com. 5 March 2021. Retrieved 17 June 2021.

IRS Announces 2022 Tax Rates, Standard Deduction Amounts And More

The Internal Revenue Service has announced annual inflation adjustments for tax year 2022, meaning new tax rate schedules and tax tables and cost-of-living adjustments for various tax breaks. Most numbers are up more than in recent years because of higher inflation. Note, these numbers, for the tax year beginning January 1, 2022, are what you’ll use to prepare your 2022 tax returns in 2023. (You can find the numbers and tables to prepare your 2021 tax returns here.)

If you don’t expect your income or life to change significantly—by getting married or starting a gig job, for example—you can use the new numbers to estimate your 2022 federal tax liability. If you’re expecting major changes, make sure you check your tax withholding and/or make quarterly estimated tax payments.

All the details on tax rates are in Revenue Procedure 2021-45. We have highlights below. We also cover the new higher retirement accounts limits for 2022.

There’s one big caveat to these 2022 numbers: Democrats are still trying to pass the now $1.85 trillion Build Back Better Act, and the latest (November 3) legislative text includes income tax surcharges on the rich as well as an $80,000 cap—up from $10,000—for state and local tax deductions. Earlier versions included cutting the estate tax exemption in half and increasing capital gains taxes. So stay tuned.

2022 Tax Bracket and Tax Rates

There are seven tax rates in 2022: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Here’s how they apply by filing status:

2022 Standard Deduction Amounts 

The standard deduction amounts will increase to $12,950 for individuals and married couples filing separately, $19,400 for heads of household, and $25,900 for married couples filing jointly and surviving spouses.

The additional standard deduction amount for the aged or the blind is $1,400 for 2022. The additional standard deduction amount for increases to $1,750 for unmarried aged/blind taxpayers.

The standard deduction amount for 2022 for an individual who may be claimed as a dependent (including “kiddies”) by another taxpayer cannot exceed the greater of $1,150 or the sum of $400 and the individual’s earned income (not to exceed the regular standard deduction amount).

Personal Exemption Amount

The personal exemption amount remains zero in 2022. The Tax Cuts and Jobs Act suspended the personal exemption through tax tax year 2025, balancing the suspension with an enhanced Child Tax Credit for most taxpayers and a near doubling of the standard deduction amount.

Alternative Minimum Tax Exemption Amounts

Here’s what the alternative minimum tax (AMT) exemption amounts look like for 2022, adjusted for inflation:

Kiddie Tax 

A child’s unearned income is taxed at the parent’s marginal tax rate; that tax rule has been dubbed the “kiddie tax.” The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages and salary. For example, unearned income includes dividends and interest, inherited Individual Retirement Account distributions and taxable scholarships.

For 2022, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,150 or (2) the sum of $400 and the individual’s earned income (not to exceed the regular standard deduction amount).

If your child’s only income is unearned income, you may be able to elect to include that income on your tax return rather than file a separate return for your child. This is allowed for 2022 if the child’s gross income is more than $1,150 but less than $11,500. But the tax bite may be less if your child files a separate return.

Capital Gains Tax

Capital gains tax rates remain the same for 2022, but the brackets for the rates will change. Here’s a breakdown of long-term capital gains and qualified dividends rates for taxpayers based on their taxable income:

Section 199A deduction (also called the pass-through deduction)

As part of the Tax Cuts & Jobs Act, sole proprietors and owners of pass-through businesses are eligible for a deduction of up to 20% to lower their tax rate for qualified business income. Here are the threshold and phase-in amounts for the deduction for 2022:

Federal Estate Tax Exemption

The federal estate tax exemption for decedents dying in 2022 will increase to $12.06 million per person or $24.12 for a married couple.

Gift Tax Exclusion

The annual exclusion for federal gift tax purposes jumps to $16,000 for 2022, up from $15,000 in 2021.

Further Reading:

IRS Announces Higher 2022 Retirement Account Contribution Limits For 401(k)s, Not IRAs

Follow me on Twitter or LinkedIn.

I cover personal finance, with a focus on retirement planning, trusts and estates strategies, and taxwise charitable giving. I’ve written for Forbes since 1997. Follow me on Twitter: @ashleaebeling and contact me by email: ashleaebeling — at — gmail — dot — com

Source: IRS Announces 2022 Tax Rates, Standard Deduction Amounts And More

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