Just like you warn your patients about tooth decay, my job as an accountant is to warn you and inform you about potential decay that could impact your personal finances. Back in April, the Obama administration announced its proposed 2014 fiscal budget, and there were a few surprises in the proposal. According to the budget proposal, there’s a possibility that estate tax levels could return to what they were in 2009 by the year 2018. So what does this mean?
- The exemption could be reduced from $5.25 million (today’s inflation indexed level) to $3.5 million (a non-inflation indexed level).
- The top estate tax could move from 40 percent (the current level) to a maximum of 45 percent.
What Do Potential Estate Tax Increases Mean To You and Your Dental Practice?
Now that there’s the possibility the exemption level could decrease—pretty dramatically, I might add—you are at risk for hitting these levels pretty quickly. Your “estate” is not just the value of your dental practice. It is also the value of your building (if you own your building) and other assets you own. And when you add the value of all of those items together, you’re probably close if not past the $3.5 million mark. And after you pass the $3.5 million mark, you could be paying hefty taxes on anything beyond that. So how can you prepare for these increases without feeling the effects?
- If you haven’t done so, start to put together a succession plan now. Do you have a business exit strategy? If not, it would be good for you to start developing one.
- Consider giving pieces of taxable estate, including your building, to your children. This could help lower the value of your estate.
Dental Practice Valuation Help
If you are unsure of what your practice is worth, there’s no time better than now to get a handle on it. With the potential for these tax increases, it’s critical that you know and understand what your practice is worth, and what you can do to minimize any tax implications. If you’re at a point where you don’t know your estate value, contact Rea & Associates. Our team of adept and talented Dental CPAs can help you determine what your practice is worth and help you avoid any potential tax pitfalls.