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Estate Planning and the Inflation Reduction Act

On Behalf of | Sep 7, 2022 | estate and tax planning, Estate Planning, estate planning documents

“For the estate planning community, the most significant thing about the Inflation Reduction Act is what it does not contain,” a National Law Review opinion piece states. While what the Act did contain a 15% corporate alternative minimum tax and a 1% excise tax on stock buybacks, there were many proposed items that ended up not being included in the final version of the Act, such as:

  • a decrease in the estate, gift, and generation-skipping tax exemptions
  • a surcharge on high-income individuals
  • an increase in the top marginal tax rate
  • an increase in the top long-term capital gains rate
  • a reduction in the qualified small business stock gain exclusion
  • eliminating valuation discounts for non-business property in privately held companies

On the other hand, the article calls attention to the fact that the Act increases the IRS budget dedicated to enforcement of tax law.

For our business owner clients at Geyer Law, estate planning and business law are inextricably related. From the earliest decisions about business formation through the creation of thorough succession plans, proper planning avoids costly disputes that can threaten any business’s financial security; periodic reviews help businesses adapt to changes in tax and business law.

Gene Marks, writing in The Hill, believes the Inflation Reduction Act will reduce taxes for many small business owners on several counts:

  • The qualified business income deduction is extended through 2027, allowing “pass-through” entities (S-Corporations and partnerships) to give the business owner a 20% deduction on business income.
  • For businesses who incur expenses to develop new products, the Research and Development Tax Credit was not only extended, but increased from $250,000 to $500,000.

The Gusto blog calls attention to two other ways small businesses may reap from the Inflation Reduction Act:

  • The Inflation Reduction Act creates new tax credits for businesses that work to become more energy efficient.
  • With more investment in taxpayer services, small business owners might have an easier time filing online and getting information.

At Geyer Law, we want to help business owners consider all the possible ramifications of the Inflation Reduction Act in their planning.

– by Ronnie of the Rebecca W. Geyer Blog Team