Here’s why:
Most software is keyed off the IRS tax filing status.  This filing status is used to generate future tax projections.  Let’s say you are in a newly minted Civil Union here in Illinois which is not recognized by the Federal Government.  The planner has two options.

Option 1:  Plan jointly but get the taxes wrong
In this scenario the planner enters in the information for both partners together.  This allows for sharing of household expenses, and joint purchases, or liabilities.  That’s great but in order to do that the software only allows the planner to check the “married” box, which means that all of the federal tax calculations will be incorrect leading to possible misleading projections.

Option 2: Get the taxes right but no joint planning
In this scenario the planner enters information for each partner separately.  This means that the Federal tax calculations will be correct, but the couple will have two separate plans, vs. a joint plan.

Luckily a few software programs, including the one I use, do allow for joint planning with a “single” federal tax status.   If you are part of a couple that is not considered married under Federal law make sure to ask your planner if their software can handle that.  You may be surprised by the answer.

Sarah’s is in the midst of a campaign to raise funds to purchase and rehab a building that will house their daytime service center (currently in a rented space) and provide housing units and support services.

During a recent finance committee meeting I was shocked to find out that gifts to Sarah’s for this project qualify for a 50% state tax deduction.   This means that if you are in the 28% Federal tax bracket you can reduce your taxes by an astounding 78% of your gift to Sarah’s for this project! (50% state + 28% federal)

For example, if you contribute $1000, $780 comes back to you  meaning that your out of pocket contribution is $220.

Below is some additional information from Sarah’s Executive Director, Kathy Ragnar

“Sarah’s Circle, a 32 year old agency serving women who are homeless has a unique means of raising funds for a new building. The new facility will expand their ability to house, train and support societies most vulnerable women, women who are homeless.

This organization offers a unique tax benefit to those who donate funds. This is not only a wonderful cause to support, but donors also receive approximately 80% of their donation back as a result of a unique state tax credit combined with the federal deduction.

This project has excellent backing – the agency has two top global firms providing services on a pro bono basis. Perkins +Will is providing all the architectural services and Mayer Brown is providing legal services. Additionally, the agency has been awarded a new HUD grant which will not only provide much needed capital, but operating dollars to operate the building once it is up and running.

This is a way for donors to improve the lives of women for years to come, while easing their tax burden in the coming year.”

Sarah’s website is www.sarahs-circle.org

Information of the new building is at www.sarahs-circle.org/ways-to-help/new-home-for-sarahs-circle.html

What does this mean for you?  If you die and your net worth is less than $3.5MM you will not have any estate taxes.  If you have over $3.5MM then your will pay a tax of about 45% of the amount over $3.5MM.  There are many exemptions and credits available so that even if your estate is over $3.5MM you may not have to pay tax on some or all of the amount above $3.5MM.

It is likely that this $3.5MM limit will be raised with inflation over time.  Should you already have an estate over the $3.5MM limit or it will be shortly, you should make sure your estate plan is up to date.