Washington State Estate Tax

Washington State has its own "stand alone" estate tax.

Washington State estate tax has the following deductions:

1. $2 million statutory deduction (RCW § 83.100.020(13))
2. Deduction for property used for qualifying farm purposes (RCW § 83.100.046)
3. Full Marital Deduction (RCW § 83.100.047)

The marginal Washington estate tax rates range from 10% to 20% and those brackets are shown below. "The Washington Taxable Estate" is the gross estate less applicable deductions (e.g. $2 million statutory + any applicable marital or farm deduction).

Effective through 12.31.13

If Washington Taxable Estate is at least	But Less Than	The amount of Tax Equals Initial Tax Amount	Plus Tax Rate %	Taxable Estate Value Greater than
$0	$1,000,000	$0	10.00%	$0
$1,000,000	$2,000,000	$100,000	14.00%	$1,000,000
$2,000,000	$3,000,000	$240,000	15.00%	$2,000,000
$3,000,000	$4,000,000	$390,000	16.00%	$3,000,000
$4,000,000	$6,000,000	$550,000	17.00%	$4,000,000
$6,000,000	$7,000,000	$890,000	18.00%	$6,000,000
$7,000,000	$9,000,000	$1,070,000	18.50%	$7,000,000
$9,000,000		$1,440,000	19.00%	$9,000,000

RCW § 83.100.040(2)(a)

Effective January 1, 2014: (changes in bold)

If Washington Taxable Estate is at least	But Less Than	The amount of Tax Equals Initial Tax Amount	Plus Tax Rate %	Taxable Estate Value Greater than
$0	$1,000,000	$0	10.00%	$0
$1,000,000	$2,000,000	$100,000	14.00%	$1,000,000
$2,000,000	$3,000,000	$240,000	15.00%	$2,000,000
$3,000,000	$4,000,000	$390,000	16.00%	$3,000,000
$4,000,000	$6,000,000	$550,000	18.00%	$4,000,000
$6,000,000	$7,000,000	$910,000	19.00%	$6,000,000
$7,000,000	$9,000,000	$1,100,000	19.50%	$7,000,000
$9,000,000		$1,490,000	20.00%	$9,000,000

Per EDUCATION—TRUST ACCOUNTS—COLLEGES AND UNIVERSITIES, 2013 Wash. Legis. Serv. 2nd Sp. Sess. Ch. 2 (H.B. 2075)

The pre 1.1.14 Washington State effective tax rate (assuming no farm property, marital deduction or other deductions) is shown below.

Gross Estate Value	Taxable Estate Value	Estate Tax Liability	Effective Tax Rate (Tax liability divided by gross estate value)
$1,000,000	0	0	-.-%
$2,000,000	0	0	-.-%
$2,500,000	$500,000	$50,000	2.0%
$5,000,000	$3,000,000	$390,000	7.8%
$7,500,000	$5,500,000	$805,000	10.7%
$10,000,000	$8,000,000	$1,255,000	12.6%

The above chart can be found here.

Obama budget proposes capping some IRAs

According to Bloomberg, President Obama's budget plan proposed prohibiting taxpayers from accumulating more than $3 million in an individual IRA. It is unclear how the administration proposes to restrict IRAs in this way and where and why the administration used the $3 million limitation figure.

Fiscal Cliff: Your Payroll Taxes are going up! (Yes, You)

In 2013, your payroll taxes are going up! One tax provision that was not addressed in the "fiscal cliff deal" was the expiration of the "payroll tax holiday." Under that temporary cut, employee's share of the payroll tax that funds social security was reduced to 4.2% from 6.2%. This cut was not continued.

Therefore, every American wage earning family will find their next paycheck lower. The Wall Street Journal calculates that this will result in additional payroll taxes of $1,000.00 per year for a U.S. family earning $50,000.00 a year.

For additional information on the payroll tax:

Payroll taxes, going up!

Payroll Tax & Social Security: troubling numbers...

2010 Federal Revenue Sources: a surprising amount came from payroll taxes.

Fiscal Cliff Deal: What it means for 2013 taxes!

As you probably already know, the House and Senate have passed a fiscal cliff deal which the President has said that he would sign.

Although in depth analysis is premature (the text of the Senate bill is 157 pages), some key figures are already known. This from the good folks at the Tax Foundation, much more in depth analysis can be found there. Check it out!

Particulars of the Deal from the Tax Foundation:

Income Tax Brackets:

"Retains the 10 percent, 15 percent, 25 percent, and 28 percent income tax brackets from the Bush tax cuts permanently

Retains the 33 percent and 35 percent income tax brackets from the Bush tax cuts for taxable income under $400,000 (single), $425,000 (head of household), and $450,000 (joint filers). Imposes 39.6 percent tax rate on income above this level."

Capital Gains & Dividend Tax:

"Capital gains tax and dividends tax will be 20 percent for taxpayers with income over $400,000 (single) and $450,000 (joint filers). This does not include the new 3.8 percent health care tax on investment income above $200,000 (single) and $250,000 (joint filers) in adjusted gross income, so the top rate for capital gains and dividends will be 23.8 percent. For lower income levels, the tax will be 0 percent, 15 percent, or 18.8 percent."

Estate & Gift Tax

"Raises estate and gift tax to 40 percent, but above the current exemption level (~$5.12 million) and adjusted for inflation in future years"

Alternative Minimum Tax

"Permanently sets Alternative Minimum Tax (AMT) exemption at $50,600 (single) and $78,750 (joint filers) for 2012 and adjusts for inflation thereafter"

Capital Gains Tax Rates in 2013: going up!

According to the Tax Policy Center, Americans can expect the Capital Gains Rate to rise at year end as the Center's chart below shows.

The second column (rates rise from 15% to 18.8%) adds an additional 3.8% that was included in the Obamacare legislation and assumes that the 2001 & 2003 rate cuts are extended. The third column (rates rise from 15% to 25%) assumes the 2001 & 2003 rate cuts are not extended and therefore that the "Pease" limitation on itemized deductions returns.

More detail and in-depth discussion can be found at the Donald Marron's Tax Policy Center Blog Post, here.