Lyric Opera of Chicago



In January 2013, Congress enacted and the President signed the American Taxpayer Relief Act (ATRA).  This “fiscal cliff” legislation created some stability and permanency to the federal income and estate taxes.  In addition, it extended the IRA Rollover provisions retroactively for 2012 and until December 31, 2013.   

In January 2011, the Illinois legislature had passed, and the Governor signed, the Illinois 2011 Tax Act which increased Illinois income and estate taxes.  So the net effect of all this on Illinois taxpayers may be a “wash” (or worse) depending on your individual situation.  Here are the details.         


On January 1, 2013, the IRA Rollover Law was re-enacted by Congress, retroactively for 2012, and for 2013.  The new law, ATRA, allows individuals to again make tax-free IRA rollover donations by December 31, 2013.    

Click here for more details on the IRA Rollover Law

The American Taxpayer Relief Act of 2013 (ATRA)

1. Income Tax and Capital Gains Tax

ATRA essentially preserved the Bush-era income tax cuts enacted in 2001, but only for taxpayers with taxable income of $400,000 or less (married filing jointly and surviving spouses of $450,000 or less).  The tax bracket for taxpayers above those amounts was increased to 39.6%.  In addition, their capital gains tax rate was increased from 15% to 20%.        

2.  Social Security Tax

Beginning in 2013, ATRA also eliminated the tax-break of reduced Social Security taxes paid by employees (formerly 4.2%) and raised them back up to 6.2% for earnings up to $113,700.    

3.  Medicare Surtax   

For taxpayers with taxable income above $200,000 (married filing jointly and surviving spouses above $250,0000), there is also a 3.8% Medicare surtax imposed under the Affordable Care Act of 2010 (“ObamaCare”).  

As a result of all the above, donors in the now-higher 39.6% and other tax brackets will get greater tax savings by contributing cash or stock to Lyric Opera in 2013 and getting a charitable deduction against their higher tax rates.     

4. Estate and Gift Tax

ATRA established a permanent federal estate tax exemption of $5 million, indexed for inflation, and a maximum estate tax of 40%.  For 2013, that “indexed” tax exemption is $5,250,000.  For those selling inherited property, any capital gains tax would be based on the more advantageous “stepped-up” basis (which sets the “basis” of the property as the value at death, rather than for what the decedent bought the property years before, usually at a much lower price).  

The lifetime gift tax exemption was “unified” with the estate tax at the same $5.25 million exemption and 40% gift tax rate.  This is over and above the annual gift tax exclusion of $14,000, which each taxpayer can give to any number of persons desired. 

Finally, ATRA again provides for “portability” of the $5.25 million estate tax exemption between spouses.  This means that if the first spouse to die does not use all of his or her $5.25 million exemption, the surviving spouse can use the balance, in addition to his or her own $5.25 million exemption.  It is not lost.     

The Illinois 2011 Tax Act
What the Taxman Giveth, He Taketh Away!

5.  State Income Tax

For Illinois taxpayers, the income tax was “temporarily” increased from 3% to 5% for the years 2011-2014.  Then the tax will decrease to 3.75% for 2015-2024 and to 3.25% thereafter. 

6.  State Estate Tax

Illinois also reinstated its estate tax to allow only a $4 million exemption (as compared with the federal $5.25 million estate tax exemption).  Moreover, the Illinois exemption is payable on the entire amount of property passed once it goes over the $4 million threshold.  As a result, a decedent can pass a full $5.25 million to descendants free of federal estate tax, but must pay Illinois estate tax on all the property passed once it goes even one dollar over $4 million.       

Keep your estate plan up to date

As a result of all the tax changes, above, it is important to consult with your attorney or financial advisor to make sure your estate plan is updated to conform with today’s tax laws.  Since these federal and Illinois tax changes are substantially different from prior law, your estate plan must also be flexible enough to deal with these now-current tax changes.

We can help.  Call us with any questions you may have.  For further information, call Lyric Opera’s Director of Planned Giving, Jonathan Siner at (312) 827-5677 or email him at .