Getting back to my weekly blogs... here's a post on year-end taxes:
Yes, I know it has been a great deal of time since I last wrote an article for you. But now I am back with some important last minute tax considerations that you may have not even thought of yet. With a new President starting in January 2017, it is imperative to take advantage of the current tax law as it stands. Although nothing is written in stone, it appears that income tax rates for individuals and businesses will become much more favorable in 2017. How can you capitalize on this? Below will provide some quick and easy tax savings measures for you that can be done over the next few days:
Business Owners & Self-Employed Individuals
Trump is currently proposing a 15% tax rate for business income. Currently the top tax rate is 39.6%. That’s a huge spread – almost 25%! In general, this means deductions will be worth for 2016 than they will in 2017.
Pay your recurring monthly recurring bills that are due in January 2017 by December 31st, 2016. Examples include but are not limited to internet, electric, water, health insurance premiums, and rent.
If you are planning to buy large items next year such as computers, office furniture, etc do so by December 31st, 2016.
For those who utilize a home office, see #1 above.
Consider maxing out your IRA, SEP IRA, etc. Please note you have until you file your 2016 tax return to do this so you do not have to do this immediately.
If you are a cash basis taxpayer, the check and/or electronic bill pay must be dated by December 31st, 2016. You can also pay by credit card to get the deduction (you can even wait to pay the credit card bill when it’s due instead of paying upfront!).
If you are an accrual basis taxpayer, make sure you provide all of your unpaid invoices to your accountant as these are deductible if paid by the time you file your taxes. Additionally, if a vendor does not invoice you until January 2017 for services provided in 2016 then tell you accountant as well so he/she can accrue these expenses against your taxes.
Trump is proposing to significantly lower the individual tax brackets so if you are a high-income earner, deductions will be worth much less in 2017. If you itemize your deductions on Schedule A of your taxes then here are some tax savings for you:
Pay your January 2017 mortgage payment by December 31st, 2016. This will provide an additional interest deduction on your itemized deductions.
Pay your Q4 2016 state & local estimated tax payments by December 31st, 2016. There are limitations on the deductibility of these payments with regards to the Alternative Minimum Tax (“AMT”). If you typically pay the AMT tax, then speak with your accountant before doing this.
Sell some “loser” investments this year. You can deduct up to $3,000 of capital losses against your taxes. Please speak to your accountant about the Wash Sale rules before you do this.
Get your charitable donations (cash or property) in by year-end.
These tips only scratch the surface, so if you have any questions for me about your personal and/or business tax situation do not hesitate to contact me!