Year-End Tax Tips
December 5, 2016 11:53 AM
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Moving forward
With Dec. 31 just around the corner, its time to start thinking about next season and to make any last-minute moves that might improve a clients tax position.
With that in mind, heres a list of tax tips for you and your clients to think about before the end of 2016, from the National Society of Accountants and others in the field.
A text-only version of this slideshow is availablehere.
With that in mind, heres a list of tax tips for you and your clients to think about before the end of 2016, from the National Society of Accountants and others in the field.
A text-only version of this slideshow is available
Sean Proctor/Bloomberg
First whats not changing
While President-elect Trump is in a strong position to enact his promise of lower tax brackets next year, its important to remember that the current income tax rates of 10, 15, 25, 33, 35 and 39.6 percent are still in effect for the tax returns being filed next mid-April.
The standard deduction amounts remain $6,300 single/married filing separately, and $12,600 for married filing jointly. The standard deduction for heads of households, however, rises to $9,300.
(Photo: Bloomberg)
The standard deduction amounts remain $6,300 single/married filing separately, and $12,600 for married filing jointly. The standard deduction for heads of households, however, rises to $9,300.
(Photo: Bloomberg)
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Deferring income
If the president-elect does manage to lower and simplify the individual tax brackets per his plan, that means rates next year will be lower, so it might be worth it for individuals to consider deferring some income into 2017.
That may mean getting a bonus in January, instead of December, or waiting to redeem a savings bond, or putting off debt forgiveness income.
That may mean getting a bonus in January, instead of December, or waiting to redeem a savings bond, or putting off debt forgiveness income.
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Keep an eye on AGI
Since some tax benefits -- including itemized deductions. personal exemptions, and education and adoption credits -- get phased out depending on a taxpayers adjusted gross income, deferring income may also make sense depending on their current AGI.
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New permanent incentives for individuals
The PATH Act of 2015 made a number of tax incentives permanent. For individuals, these include:
--The American Opportunity Tax Credit;
--The teachers $250 classroom expense deduction;
--The ability to deduct state and local sales tax instead of state income taxes;
--The exclusion for direct charitable donation of up to $100,000 from an IRA; and,
--The 100 percent gain exclusion on qualified small-business stock.
--The American Opportunity Tax Credit;
--The teachers $250 classroom expense deduction;
--The ability to deduct state and local sales tax instead of state income taxes;
--The exclusion for direct charitable donation of up to $100,000 from an IRA; and,
--The 100 percent gain exclusion on qualified small-business stock.
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New permanent incentives for businesses
The PATH Act of 2015 made a number of tax incentives permanent. For businesses, these include:
--The reduced five year recognition period for S corp built-in gains tax;
--15-year straight-line cost recovery for qualified leasehold improvements, restaurant property and retail improvements; and,
--Charitable deductions for the contribution of food inventory.
--The reduced five year recognition period for S corp built-in gains tax;
--15-year straight-line cost recovery for qualified leasehold improvements, restaurant property and retail improvements; and,
--Charitable deductions for the contribution of food inventory.
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Max out retirement accounts
If a taxpayers employer offers matching, then maxing out contributions to a 401(k) is as close to a no-brainer as you can get but even without matching, sequestering income in 401(ks), IRAs, Keoghs and the like is still a great deal.
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Tax-loss harvesting
Even in the current bull market, a portfolio can contain some duds but they can still be useful! Taxpayers with large amounts of taxable gains in 2016 may want to offset some of those by realizing losses on those duds to lower their overall capital gains exposure.
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Be careful with mutual funds
Many mutual funds make capital gains distributions in December, so taxpayers will want to bear that in mind when buying or selling. That a fund is or isnt planning a major distribution neednt necessarily be a deal-breaker but it may add to the eventual tax bill.
