Does the Inflation Reduction Act Impact Your Estate Plan?
Last week President Biden signed the Inflation Reduction Act of 2022 into law. The Inflation Reduction Act is a trimmed down version of the Build Back Better bill that passed the House late last year, but never gained victory in the Senate. Since that time, many have inquired as to whether the Act will result in the need for changes to their estate plan.
Some of the highlights of the Inflation Reduction Act include:
Corporations with at least $1 billion in income will have a new tax rate of 15%.
Income taxes on individuals and households won’t be increased.
Stock buybacks by corporations will face a 1% excise tax.
Medicare recipients will have a $2,000 cap on annual out-of-pocket prescription drug costs, starting in 2025.
$80 billion will be invested in the IRS over the next 10 years.
Affordable Care Act (ACA) subsidies will be extended through 2025.
Investments in climate protection, including tax credits for households to offset energy costs, investments in clean energy production and tax credits aimed at reducing carbon emissions.
In regard to your estate plan, the most significant thing about the Act is what it does not include. The Build Back Better bill as originally proposed included many proposals that would have affected common estate planning techniques used by wealthy individuals. None of these proposals made into the Inflation Reduction Act. So, the answer, for now, is that the Inflation Reduction Act does not necessitate any changes to your plan. However, it is important to keep in mind that Tax Cuts and Jobs Act (don’t you love the names Congress gives these laws), the current tax law that passed in 2017 will expire in many ways if not extended or made permanent by the end of December in 2025. If this happens, it would reduce the amount of the estate tax exemption available to each individual. Also, the SECURE Act passed in 2019 and the SECURE Act 2.0 which is currently awaiting passage in the Senate are evolving how we plan for retirement accounts on the death of an owner. So, stay tuned. The only thing constant in tax law is change.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.