Ethan R. Okura
Hawai‘i Herald Columnist
In last November’s column, I wrote about the then-proposed federal Tax Cuts and Jobs Act. There were quite a few changes in the proposed legislation, which left many people in a state of confusion as the bill went through several revisions before finally being passed into law. Many of the changes initially proposed did not make it into the final bill as I had originally anticipated.
Fast forward to last month when I wrote about how the new law temporarily doubles the estate tax exemption. It now allows each of us to give away during our lifetime, or to pass away owning, up to $10 million (adjusted for inflation) without having to pay any gift or estate tax.
In this month’s column, I will cover some of the income tax aspects of the law and how they might affect you.
The previous rates for the various tax brackets were: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent. The new rates are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. With a few exceptions, most taxpayers will do better with the new brackets and rates.
Unfortunately, individuals with incomes over $157,500 will be bumped up from the 28 percent rate to the 32 percent rate, and those with incomes over $200,000 will be bumped up from the 33 percent rate to the 35 percent rate.
Among married couples filing jointly, only those making between $400,000 and $416,700 will pay more taxes. They will get bumped up from the 33 percent bracket to the 35 percent bracket.
Many people will be affected by several other big changes, including the doubling of the standard deduction to $12,000 for a single person, $18,000 for a head of household and $24,000 for a married couple filing jointly; and the elimination of many other deductions that were previously allowed, such as:
Ethan R. Okura received his doctor of jurisprudence degree from Columbia University in 2002. He specializes in estate planning to protect assets from nursing home costs, probate, estate taxes and creditors.
This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.