Taxes Are In The Air

Taxes Are In The Air

By Melinda Gustafson Geravsi

January 22, 2024 

Garner Park, Madison, WI - Image by M. Gustafson Gervasi 2024

January has arrived, bringing with it artic air to my hometown of Madison, Wisconsin.  No matter where you live in America, the month of January also brings the flutter of envelopes into your mailbox, all stamped IMPORTANT: TAX INFORMATION.  Whether it be a W2 from your employer, a 1099-Misc from your investments, or a K-1 showing stock gains, many of us are gathering forms to complete our annual income tax filings.  

Taxes quickly become complicated and technical because the IRS tax code is anything but simple.  When in doubt, I also say it is less expensive to hire a CPA for advice beforehand than to hire one to clean up a mess after-the-fact.  In area of focus, estate planning and probate, there are three main taxes that come up in client meetings:

1. Income Taxes -- a tax owed on income that can be owed at both the federal and state level.  Also, when a person dies there might be income taxes owed on earnings from January 1st to the date of death, and then income taxes owed on earnings (think dividends, interest, etc) from the day after death to December 31st.
2. Gift Taxes -- a tax owed by the person making a gift IF the tax is not exempt and exceeds the limit set by the IRS for that year (in 2024 the limit is $18,000/person).  Quite often I see a child who was named as a co-owner of a parent's bank account.  The parent dies and the child becomes the owner of the entire bank account.  If that child wants to share the account with a sibling who was not named, and that share is over the gift tax limit, a gift tax return may need to be filed.  It is an unpleasant surprise.
3. Estate Taxes -- a federal (and sometimes a state tax depending on where you live) that is assessed on assets that exceed a level set by Congress.  In 2024 that limit is $13.6 million for an individual.  While this tax impacts less than 1 percent of Americans, many people harbor a fear of the "death tax".  In my everyday operations I see the gift tax surprise more people than the federal estate tax, however, I focus on working with middle class Americans.

A blog is meant to spark thought, reflection, and discussion.  It is not legal advice.  Please consult with an attorney (and often a CPA) who is licensed in your state of residence for input on your unique situation.  Be well and thank you for reading.