Economic Growth and Tax Relief Reconciliation Act of 2001

(redirected from EGTRRA)
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Economic Growth and Tax Relief Reconciliation Act of 2001

Legislation in the United States that reduced marginal tax rates for most American taxpayers. For example, it reduced the lowest bracket from 15% to 10% and the highest from 39.6% to 35%. It also simplified tax consequences of gifts and retirement plans. Proponents of EGTRRA claim that such policies spur economic growth. Critics point to lost government revenues and claim that the tax cuts primarily benefited the wealthy.
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The EGTRRA repealed the prior stepped-up (or stepped-down) basis rules under IRC section 1014 and replaced them with the new modified carryover basis rules under IRC section 1022.
The act also extends EGTRRA's repeal of the itemized deduction phaseout and the personal exemption phaseout for two years through 2012.
But in 2005, EGTRRA's phase-out of the pick-up tax altered this strategy.
Among other things, EGTRRA calls for an increase in the estate tax unified credit exclusion (now $2 million) to $3.5 million in 2009, followed by a one-year repeal of the tax in 2010 and--absent further legislation--reinstatement of the pre-2001 tax regime in 2011.
In addition, if plans are not further amended for changes made by the 2001 Economic Growth and Tax Relief Reconciliation Act (EGTRRA) that are effective in 2002, then this act's higher deduction limitations are not available.
Before amendment by the act, the maximum credit had been scheduled to revert at the end of 2010 with the sunset of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, PL 107-16) to $6,000 for special-needs children only, with no inflation indexing and no credit for non-special-needs children.
Under EGTRRA 2001, both the estate tax applicable exclusion amount and the generation-skipping exemption are $3,500,000 in 2009, meaning that the first-to-die can take full advantage of the generation-skipping exemption by placing $3,500,000 into the "B" trust.
Under the provisions of EGTRRA, the GST exemption is tied to the estate tax exemption amount--$3.5 million in 2009.
Under EGTRRA, the GSTF exemption increased to $2 million in 2007, and it will rise to $3.5 million in 2009.
* Besides advising clients about the nonrefundable credit's limits and strategies for carryforward of excess credits, CPAs can also address timing issues as Congress considers whether to extend for 2011 the higher maximum credit amount and income phaseout threshold and other provisions of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), currently scheduled to sunset on Dec.