Everyone has different things to consider at the end of the year when planning for the tax season. There is still a little more time left in the year to review some key tax-related items.
Tax Rates are Expected to be Reduced for 2017
The one thing that we believe we can rely upon for the upcoming changes to the Income Tax Code is that 2017 tax rates will be lower than the 2016 tax rates. Therefore, all taxpayers should delay recognizing income until 2017 whenever possible and should accelerate deductions into 2016. That means that you should go ahead and purchase business equipment, vehicles, leasehold improvements, prepay invoices, maximize pension contributions, make charitable contributions and pay state estimated taxes before December 31st.
Watch Out For Expiring Deductions
A few deductions will expire at the end of this year, so it’s important to act now to take advantage of them in the remaining weeks of 2016.
Did You Pay For College Costs This Year?
A deduction for tuition and expenses paid for yourself, your spouse or a dependent can be used on your 2016 return but may not apply in 2017.
Expiring Provisions Related to Home Ownership
Private mortgage insurance (PMI), the amount you typically pay when your down payment is below 20%, may only be deductible through the end of 2016.
If you were involved in a foreclosure, short sale or loan modification related to your primary residence, you can exclude up to $2 million in forgiven debt from you taxable income, but only through the end of this year.
Time to Donate and Give Back
Charitable giving at the end of the year is a common way to get a deduction. Remember to get a receipt for any contribution, no matter the amount. You can also make a contribution from a retirement account to a charity and reduce taxable income from your required minimum distribution.
Review Your Retirement Account
Now is the time to put the maximum amount of money that you can in your employer sponsored retirement account. If you have an IRA, you have until April 2017 to contribute for 2016. If you’re operating a Sub-Chapter S Corporation and are interested in a 401K Retirement plan, it must be established by December 31.
The New Year is a good opportunity to meet with your tax professional and begin planning to meet your tax goals. Contact Fricke & Associates, LLC at www.frickecpa.com or call 770-216-2226 for more advice.