Fiscal Cliff Averted: Now What?

The Senate passed an eleventh-hour tax law on New Year’s Eve and the House of Representatives followed suit a day later, averting, for now, the so-called “fiscal cliff.” It appears that the new law is similar to the old 2010 law as far as estate taxes are concerned: individuals are allowed to transfer up to $5,120,000, indexed for inflation, during life or at death. The maximum estate tax rate was raised from thirty-five percent (35%) to forty percent (40%). The exact details of much of the rest of the law are still being evaluated, and it is quite possible that there will be further changes to various tax provisions during negotiations over planned spending cuts (the “sequester”) and the debt ceiling limit, both of which will take place by the end of February. So, in short, the “fiscal cliff” was averted, but there are more and thornier negotiations to come before we have a clear picture of what the Federal tax regime will look like going forward.