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    • Kathleen Reynolds
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      Taxes Section

      NOTE: If you are creating Income streams from the Income/Expense/Contribution/Distributions section of the software, entering AGI here will be in addition to the streams.  Most people use one or the other approach.

      For information on the §691(c) Deduction, click here.

      Filing Status

      You are going to have to visit this data entry section for every analysis that you run. Fortunately, there are only a few important choices to make here:

      1. Select whether to calculate the taxes using the Adjusted Gross Income or Income Tax Rates. This is one of the most important choices in the program. Use the Adjusted Gross Income method for Roth Conversions and those cases which involve the client change tax brackets. Use the Tax Rates approach when you want to simplify things and not worry about tax brackets. When you select which approach to take, the inputs on the rest of this screen change appropriately. Click either Adjusted Gross Income or Income Tax Rates for more information.
      2. Decide whether you want to include State and Federal Estate Taxes in the analysis. Click the Estate Tax tab to see the choices. To include the taxes, check the box labeled “include Estate Tax” Once this is checked, you’ll have a few other choices:
        1. Calculate Estate: Checking this box causes the program to calculate the total taxable estate in each year. It does this by simply adding up the values of the appropriate accounts. If you uncheck this box, a separate input section called Taxable Estate Amount will appear, allowing you to enter the taxable estate to be used in each year.
        2. Prior Gifts: Enter the total amount of taxable gifts made after 1976.  Enter the amount of unified Credit Used by the Prior Gifts. Click on the computer icon to the left of the entry field to calculate the maximum unified credit allowed based on the Prior Gifts. The inflation rate entered on the main inputs screen is used for the calculation.
        3. State Death Tax: Select the Domicile and Recipient Class to use when calculating state death taxes. The program uses Brentmark’s State Death Tax Manager to make sure it has the latest state information. Click the button to run the State Death Tax Manager.
        4. Maximize Stretch: (Do not use Retirement Accts to Pay Estate Tax). Checking this box causes the program to only use Other Assets to pay for the Estate Taxes. If the balance of Other Assets is insufficient to pay the taxes, the program assumes that the remaining portion of the estate tax expense is covered outside of the analysis. If the box is unchecked, the program will liquidate assets in the following order to satisfy the estate tax: (1) Other Assets, (2) Retirement Plan, (3) Roth IRA, and (4) Roth 401(k).
      3. If you are including the Estate Taxes, click the Bypass Trust tab and indicate whether you want to illustrate a Bypass Trust or not. Click here for more information about Bypass Trusts.

      Estate Tax Inputs
      For calculations in 2010, the Estate Tax tab includes an input to choose between a 35% tax rate, or No Estate Tax.

      A tab for the 2017 Tax Cuts and Jobs Act has been added, which includes inputs to choose independently for each of the alternatives whether the income tax and/or estate tax changes will sunset in 2026.


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