Military Officer - March 2006 - (Page 22)

rapidfire An Eye on Tax Changes s of Jan. 1, 2006, the Federal Estate Tax Exclusion increased to $2 million per person (up from $1.5 million in 2005) and the Annual Gift Tax Exclusion increased to $12,000 per donor per donee (up from $11,000 in 2005). The $2 million exclusion amount provides a credit of $780,800 to offset taxes owed by an estate. These changes mean fewer estates will be subject to taxation at the federal level and will allow for greater annual giving opportunities. Although the increase is welcome, remember your gross taxable federal estate includes: ■ assets owned at death, such as brokerage, IRA, and 401(k) accounts; ■ 50 percent of jointly held assets; ■ face value of life insurance policies you own and are the insured of; ■ value of certain assets transferred within three years of death; ■ present value of certain annuities; and ■ assets in certain types of trusts you exercise control over. Many people forget to add the value of life insurance when estimating their potential estate tax liability. The chart below summarizes the projected changes in estate tax exemption levels over the next several years: Year 2006-2008 2009 2010 2011 Enrollment Changes for TSP A E Exemption $2 million $3.5 million Federal estate tax repealed $1 million Top Estate Tax Bracket 46%, dropping to 45% in 2007 45% N/A 55% ffective in 2006, civilian and military employees are no longer subject to a percentage limit on the amount they may contribute to a regular Thrift Savings Plan (TSP) account. They may contribute the full amount allowed by the IRS annual elective deferral limit, which is $15,000 for 2006. Investing in TSP is not limited to stocks. People can choose safer investments, such as government securities, or invest in the new Lifecycle Funds. Open seasons were eliminated July 1, 2005, so employees may start, change, stop, or resume their TSP contributions at any time. TSP offers investors the chance for lower taxes each year they contribute while not having to pay taxes on earnings until they reach retirement. Eligible employees can take out loans, make in-service withdrawals from their TSP accounts, and keep their account even if they leave military or federal civilian service. ON THE WEB ■ Information on TSP investment funds is available on the TSP Web site at www.tsp.gov/ rates/fundsheets.html. Although Congress repealed the estate tax, it is only effective for one year — 2010. Under current law, the federal estate tax returns in 2011 with the threshold reduced to $1 million and the top bracket skyrocketing to 55 percent. Keep your eye on this issue so you don’t get blindsided in 2011! For the Student in Your Life Students in military families now can receive free SAT and ACT test preparation programs. In association with DoD, eKnowledge LLC announced that a group of NFL, NFL Europe, AFL, and CFL football players has sponsored several million dollars’ worth of programs (valued at $199 each) to military families for the 2005-2006 school year. Military personnel, active or retired, can request as many programs as they need, paying only the cost of shipping and handling. Each program has two CD-ROMs that include more than 10 hours of training video and require approximately 40 hours of student participation. >> ON THE WEB: For more information, visit www.militarystudent.dod.mil. 22 MILITARY OFFICER MARCH 2006 IMAGES: CLOCKWISE FROM TOP LEFT, IMAGES.COM/CORBIS; MATTHIAS KULKA/CORBIS; CORBIS http://www.tsp.gov/rates/fundsheets.html http://www.tsp.gov/rates/fundsheets.html http://www.militarystudent.dod.mil

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Military Officer - March 2006 Contents From the Editor President’s Page Call For Board Nominations Your Views MOAA Directory Rapid Fire Washington Scene Financial Forum MOAA Member Services Ask the Doctor Chapter Activities Live It Up! Top Picks On the Road Again Destination: Arizona By the Numbers Cover Story: One Clean Shot From Combat to Congress Pages of History Information Exchange Advertising Index MOAA Calendar Sounding Taps Encore

Military Officer - March 2006

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