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Recap of Tax Changes for 2006
The following is a recap of selected tax
changes impacting gift taxes, the annual
exclusion, and estate taxes effective in 2006:
- The annual exclusion for 2006 is $12,000
per donor per donee. In addition to the $1
million gift exemption, persons may make "present interest gifts" of $12,000
annually. For example, an aunt and uncle
could each make gifts of $12,000 to each
of their 8 nieces for a combined gifting
amount of $192,000.
- The federal estate tax exemption for
2006 has been increased to $2 million per
person. Additionally, the estate tax is a flat
46%. For example, an estate of $2,000,000
pays no tax; an estate of $2,002,000 pays
$920 in estate taxes – only the amount in
excess of $2,000,000 is subject to the 46%
tax.
- The Massachusetts estate tax exemption for 2006 has increased to $1 million. Once
a decedent's estate crosses that threshold,
the tax rates effectively "reach back" to
tax from the first dollar. At $1 million, the
initial marginal tax rate is 41%, so that at
$1.1 million the tax is about $39,000.
After that, the marginal rate flattens out to
6.4%, slowly rising to 16% at $10.1
million. For example, an estate of $2
million would pay $99,600 in
Massachusetts estate tax.
Sources: SPCA Tampa Bay, 1-9-06 & Mark Worthington
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