As we near the end of 2016, we at Sharkansky have been introspective about our tax planning strategies. Perhaps you’ve heard from us in years past that it’s best to accelerate deductions and defer income to decrease your taxes while, of course, taking into account current tax law. In years past, the end of the year was full of uncertainties as we waited to hear which tax laws would pass by Congress.
Today, the big unknown is what the tax laws will be in 2017. President-Elect Trump is proposing some of the biggest tax changes in decades. The question we face now is how these potential changes impact our 2016 year-end tax planning. To some extent, your decisions will depend on your personal opinions as to whether those tax law changes will become law, and when.
Under Trump’s proposed law, tax rates will likely go down next year. This will change our approach back to accelerating deductions and deferring income. This sounds simple, but it is not. Maximizing business deductions is a good way to start. We also need to take a closer look at personal deductions.
There are two parts of the proposed plan that need to be considered.
- The Alternative Minimum Tax (AMT) could possibly be eliminated in 2017. Taxpayers subject to AMT are not allowed deductions related to state income taxes, real estate taxes and investment expenses.
- Itemized deductions could be limited to a cap of $200,000 or limited to only charitable contributions and mortgage interest. High income taxpayers not expecting to be subject to the AMT in 2016 should pay deductible taxes in 2016. For those planning to make large charitable contributions, 2016 may be a better than 2017 for making those contributions.
It is important to remember that there are many factors to consider when planning for taxes in any year. If you have concerns or would like to consult with us on your year-end tax planning strategies, please contact us at 508-584-2120. We look forward to hearing from you.
Written by Robin Reed, Director of Tax