VIEWpoint Issue 1 | 2022
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Where tax planning is concerned today, uncertainty is the name of the game. Will the extenders passed last December containing valuable breaks expire, be revived for 2015 or be made permanent? What lies ahead for long-term tax reform? How does the recent power shift in Congress and an exiting president affect the likelihood of such reform?
Amidst all of these questions, one thing is certain – taxpayers must anticipate last-minute changes and be prepared to adjust their tax planning strategies accordingly. Year-end could come and go before we know which provisions will apply for 2015, so you’ll want to be aware of the possible tax reduction strategies in order to act on them if the need arises.
To help, Doeren Mayhew offers our 2015-2016 Tax Planning Guide, which includes the business and personal strategies you should be considering. Read about personal planning below, and download the full guide for business tax planning.
In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions, often referred to as “tax extenders.” More than 50 temporary tax provisions expired at the end of 2014 for individuals and businesses. Although there are no guarantees at this point that you can count on these as part of your tax-saving strategy for this year, popular provisions that may be extended include:
Generally, the best way to reduce your current tax year liabilities is to accelerate as many deductibles for the current year and defer any income you can to the following year. However, this is not the best practice for every situation, as this strategy can be costly if not well thought through. Think before you act – but take into consideration some of these basics in tax planning this year:
The first step in planning a successful tax strategy is knowing where you land in terms of tax rates for the year. If, for instance, you know you’ll be in a higher tax bracket in 2016, you might determine to accelerate income this year and postpone your deductible expenses until 2016. Check out the tax rate schedule below to find your place.
Do you have significant itemized deductions from state income taxes or property taxes? If so, make sure you factor in the alternative minimum tax (AMT), a separate tax system limiting deductions, into your planning. Traditional year-end maneuvers of deferring income and accelerating depreciations can have a negative effect. If your AMT liability exceeds your regular tax liability, you are required to pay it. Although AMT has a lower tax rate of 26 percent vs. 28 percent, the lower tax rate is applied to a higher taxable income. See the on page 8 to learn more about AMT thresholds.
Charitable givings are positive in a two-fold manner – not only do they help to serve a cause, but they also help reduce an individual’s tax bill each year. A surge of charitable givings occurs every year in the fourth quarter as a tax-reducing strategy. If well thought out it may also help save money on your estate taxes.
When it comes to investments, careful tax planning is important in order to keep your money yours. From the types of investment channels you choose to when you buy and sell, each move you make can have a tax consequence. Although how, why and when you invest shouldn’t be dictated only by these tax factors, consideration should be given to them. Don’t let Uncle Sam take your hard-earned money – keep reading to learn more about key areas that will help you make educated investments.
Although time, not timing, is generally the key to long-term investment success, timing can have a dramatic impact on the tax consequences of investment activities. Depending on your capital gains tax rate (see chart below), you could be paying up to 20 percent lower than your ordinary income rate. Proper timing is the key. Here are a few strategies to consider before year end to help save on your capital gains tax liability:
Did you know you can carry over losses indefinitely? If your capital losses exceed your capital gains in 2015, you likely will be able to carry over any unused losses to future years. Losses can be applied against 2016 capital gains, as well as up to $3,000 of other income. Keep track of your carryforward to help determine your alternative minimum tax for next year.
Effective since 2013, NIIT (net investment income tax) is a 3.8 percent tax on the net investment income of high-income individuals. If you have an adjusted gross income over $200,000 a year ($250,000 for joint filers and $125,000 for married filing separately) you may owe the tax add-on. Included in net investment income are capital gains, dividends and interest, among other things. If you plan right, many of your other tax planning strategies will help to avoid or defer NIIT requirements.
Today, tax planning is more complicated – yet more important – than ever due to tax reform uncertainty. Day in and day out, Doeren Mayhew’s tax advisors work to keep up on the latest tax laws to help develop tax-reduction strategies that are just right for each of our clients’ personal and business situations. Contact our tax accountants in Florida, Michigan, North Carolina or Texas.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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