Page 24 THE EVERETT ADVOCATE – FRiDAy, ApRil 21, 2023 Massachusetts Estate Tax Exemption Increase T he Massachusetts House of Representatives on April 13, 2023 passed tax legislation that included increases in the rental deduction, reducing the short-term capital gains tax rate from 12% to 5%, creating a refundable child tax credit, a doubling of the circuit breaker tax credit from $1,200 to $2,400, increasing the earned income credit, several other provisions as well as an increase in the estate tax exemption from $1million to $2million. The increase in the estate tax exemption is a step in the right direction. $1million is simply way too small of an exemption. $2million is better but I’d like to see even higher. There are so many taxpayers over the $1million threshold that the state had to increase it. Too many people have moved to states that are more tax friendly. New Hampshire has no estate tax. Florida has no estate tax. Texas has no estate tax. For the few states that do have an estate tax, the exemptions are much higher than in Massachusetts. A $2million exemption is certainly much better than $1million but as real estate and the stock market continue to rise in the years to come, those exemptions might not go far enough. Say nir Sa a There may be down markets but inevitably the real estate market and stock market are bound to rebound if history repeats itself. Many taxpayers have simply relocated to more tax-friendly states in order to avoid not only the Massachusetts 5% income tax but to avoid the estate tax altogether. The federal estate tax exemption is now $12.9million. Although it is scheduled to sunset and drop back down to $6million in 2026, it is still much more than the exemption in Massachusetts. The good news is the house’s version of the new estate tax law provides for the estate tax to be assessed only on the value of the gross estate over $2million, not the fi rst $2million, once you surpass that threshold. A married couple can then structure their estate, if they so choose, in such a fashion as to leave $4million Massachusetts estate tax free to their children by making sure each spouse capitalizes on his or her $2million exemption. This increase in the exemption is long overdue. Let’s hope the Senate passes its version of the tax package quickly and a fi nal bill is agreed to. There are simply too many taxpayers that will continue to leave the state in order to avoid the Massachusetts estate tax. Even if they continue to own real estate in Massachusetts, they might be inclined to transfer their real estate holdings into limited liability companies to avoid having the Massachusetts real estate being subject to the Massachusetts estate tax. The non-resident will be deemed to own an intangible membership interest in a limited liability company that results in the value of the interest not being taxable in Massachusetts. This would be similar to owning stock in Tesla. As a Florida resident, the Tesla stock would not be subject to the Massachusetts estate tax. Joseph D. Cataldo is an estate planning/elder law attorney, Certifi ed Public Accountant, registered investment advisor, AICPA Personal Financial Specialist and holds a masters degree in taxation. REQUEST FOR PROPOSALS SCHOOL NUTRITION PROGRAM: FOOD SERVICES VENDOR RFP Number 04-14-001 Pioneer Charter School of Science is seeking a food service vendor. • PCSS is open 195 School days. • PCSS needs service 5 days a week. • Number of Students in all campuses 1400 Please send your proposals to Pioneer Charter School of Science located at 466 Broadway, Everett, MA 02149, before 11:00 a.m., Friday, May 26, 2023. The contract will be awarded to the responsive and responsible Vendor with the proposal that is most advantageous to PCSS with price as the primary factor. For more information, please contact: Pioneer Charter School of Science Business Office www.pioneercss.org 466 Broadway Everett, MA 02149 ahliddin@pioneercss.org Phone: 617-294-4737 Fax: 617-294-0596 For Advertising with Results, call The Advocate Newspapers at 617-387-2200 or Info@advocatenews.net y Senior Seni by Jim Miller New RMD Rules for 2023 Dear Savvy Senior, What are the new rules on required minimum distributions from IRAs and 401(k) s? I will turn 72 this year and want to be clear on what I’m required to do. Planning Ahead Dear Planning, Thanks to the SECURE Act 2.0 that was passed by Congress last December, there are several new rules that affect required minimum distributions (RMDs) from traditional IRAs, 401(k)s and other tax-deferred retirement accounts. These changes, which build on the original SECURE Act of 2019, are a benefi t to retirees by increasing the RMD age and lowering the penalty for missing a withdrawal. Here’s what you should know. New RMD Rules As of Jan. 1, 2023, the starting age for taking RMDs is now 73, up from 72. And it rises to age 75 in 2033. This change means that if you turn 72 this year, as you stated in your question, you can delay your RMDs one more year, allowing your savings in these accounts to grow longer, tax deferred. But once you turn 73 (next year), you must start taking annual RMDs from the tax-deferred retirement accounts you own – like traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s and 457(b)s – and pay taxes on those withdrawals. Distributions are taxed as ordinary income in your tax bracket. There are, however, a few exceptions. Owners of Roth IRAs are not required to take a distribution, unless the Roth is inherited. And starting in 2024, Roth 401(k)s will not be subject to RMDs either. There’s also a work waiver for RMDs you should know about. If you are still working beyond age 73, and you don’t own 5 percent or more of the company you work for, you can delay withdrawals from your employer’s retirement plan until after you retire. But if you have other non-work-related accounts, such as a traditional IRA or a 401(k) from a previous employer, you are still required to take RMDs from them after age 73, even if you’re still working. Deadlines and Penalties Generally, you must take your distribution every year by Dec. 31. First timers, however, can choose to delay taking their distribution until April 1 of the year following the year you turn 73. But be careful about delaying, because if you delay your fi rst distribution, it may push you into a higher tax bracket because you must take your next distribution by Dec. 31 of the same year. Also note that you can always withdraw more than the required amount, but if you don’t take out the minimum, you’ll be hit with a 25 percent penalty (it was 50 percent) on the amount that you failed to withdraw, along with the income tax you owe on it. This penalty drops to 10 percent if you take the necessary RMD by the end of the second year following the year it was due. Distribution Amounts Your RMD is calculated by dividing your tax-deferred retirement account balance as of Dec. 31 of the previous year, by an IRS estimate of your life expectancy. A special rule applies if your spouse is the benefi ciary and is more than 10 years younger than you. IRA withdrawals must be calculated for each IRA you own, but you can withdraw the money from any IRA or combination of IRAs. If you own 403(b) accounts, they too allow you to total the RMDs and take them from any account or combination of accounts. With 401(k) plans, however, you must calculate the RMD for each plan and withdraw the appropriate amount from each account. To calculate the size of your RMD, you can use the worksheets on the IRS website – see IRS.gov/Retirement-Plans and click on “Required Minimum Distributions.” Or contact your IRA custodian or retirement-plan administrator who can do the calculations for you. For more information, see the “Distributions from Individual Retirement Arrangements” (publication 590-B) at IRS.gov/pub/irs-pdf/p590b. pdf. Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of “The Savvy Senior” book. nior ior

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