The 2003 Act lowered tax rates applicable to long term capital gains and qualifying dividend income from 20% to 15% through December 31, 2008. The 2006 Act extends the expiration of these lower rates for most taxpayers until 2010. The 2003 Act also implemented a 5% tax rate for taxpayers who would otherwise be taxed at 10% or 15% on ordinary income until 2007. With the 2006 Act, the 5% tax rate changes to zero for 2008.

As a result of this extension, there is now a three-year period from 2008 to 2010 during which there will be no federal income tax for lower income taxpayers with long-term capital gains and qualifying dividend income. Currently the 15% tax bracket tops out at $30,650 of taxable income for single taxpayers and $61,300 for married couples filing a joint return.

The bill increases the AMT exemption for 2006.
For 2005 the AMT exemption was $58,000 for married couples and $40,250 for single taxpayers. These amounts are increased to $62,550 and $42,500 respectively for 2006.

Currently, children under the age of fourteen with unearned income in excess of $1,700 are taxed at their parents' marginal tax rate. Often referred to as the "kiddie tax," this provision limits the benefit of lower income tax rates, which can be achieved through shifting assets to children.

The 2006 Act raises the age at which children are no longer taxed at their parents' rate from fourteen to eighteen, effective for taxable years beginning after December 31, 2005. In other words, until a child is 18 years old, his or her income is taxable at the parents' higher tax rate.

We always appreciate referrals from our satisfied clients and business partners to friends, family members or business contacts. We welcome the opportunity to serve the people you care about. Click on the blue Forward Email at the bottom of the page to send this newsletter to someone who will benefit from our insights.

Question:

Hi Mr. Morris,

I know I could save money down the road if I planned my estate but I'm so busy and I really don't have the time. Can't it wait until I'm closer to retiring?

Answer:

Preparing your wealth preservation plan will require a little of your time and energy but the payoff is tremendous. By planning your estate you will:

* preserve your wealth by minimizing your taxes
* prevent your children's ex-spouses from obtaining your wealth
* insure that your goals are accomplished efficiently and effectively
* protect your wealth from claims of creditors
* retain maximum control over your wealth
* avoid guardianship if you become incompetent
* maintain the continued privacy of your affairs
* and ensure that your family faces minimum administrative costs when your estate is distributed

Don't be intimidated by the process, you can leave the hard work to us at the Morris Law Group. Each wealth preservation plan we develop is customized to meet our client's specific goals. By implementing the appropriate planning tools, including trusts, gifting programs, insurance planning, charitable planning and private foundations we can help you provide a better lifestyle for you now and for your family when you're gone.

So move it to the top of your To Do List! The sooner an estate plan is made, the more effective it can be. If you’d like more information, email us at Info@Law-Morris.com.

Best Regards,

Stuart R. Morris, Esq.