With a change in administration and the possibility of lower tax rates in the future, year-end planning this year may be more important than in past years.
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Denver, CO (PRWEB) December 21, 2016
The end of the year is not only a time to celebrate the holidays and think about New Year’s resolutions, but a time for year-end tax planning. “With a change in administration and the possibility of lower tax rates in the future, year-end planning this year may be more important than in past years,” said CPA Pat Comiskey, founder of Comiskey & Company, P.C.
To assist taxpayers with year-end tax planning, Comiskey lists the following pointers:
No. 1: Inflation adjustments to rate brackets and exemption amounts. “For both 2016 and 2017, some individuals will benefit from inflation adjustments in the thresholds for applying the income tax rates, higher-standard deduction amounts, and higher personal exemption amounts,” said Comiskey.
No. 2: Capital gains. Long-term capital gains are currently taxed at a federal rate as high as 20%, while ordinary income can be taxed as high as 39.6%. Taxpayers are subjected to a federal 15% rate if their ordinary tax rate is lower than 39.6%. “For taxpayers in the 10% ordinary income tax bracket, the tax rate for long-term capital gains is 0%, and a 3.8% surtax on net investment income may apply,” added Comiskey. “Strategies for matching capital gains and capital losses to make the most of these rules must be completed before the end of the year, including the harvesting of capital losses. Be careful of the ‘wash sales’ rules.”
No. 3: Qualified dividend income is taxed at the same favorable tax rates that apply to long-term capital gains. Converting investment income taxable at regular rates into qualified dividend income can achieve tax savings and result in higher after-tax income. “Again, the 3.8% surtax on net investment income may apply,” noted Comiskey.
No. 4: First-year depreciation deduction. Most new machinery and equipment bought and placed in service in 2016 qualifies for the 50% bonus first-year depreciation deduction. “Bonus first-year depreciation has been extended through 2019 with a number of modifications, including a gradual reduction over that time (50% for qualified property placed in service in 2015 through 2017, 40% for 2018, and 30% for 2019),” said Comiskey.
No. 5: Charitable contributions. “The timing of charitable contributions can have an important impact on year-end tax planning,” concluded Comiskey. “Individual taxpayers who are at least 70.5 years old can contribute to charities directly from their IRAs without having the amount of their contribution included in their gross income. By making this move, some taxpayers reduce their tax liability even more than they would have if they had received the distribution from their IRA and then contributed the amount distributed to charity.”
About Pat Comiskey, Comiskey & Company, P.C.
Pat Comiskey specializes in business advisory services, including tax planning and compliance, business valuations, and retirement/estate planning. Pat oversees all tax and tax-related engagements performed by the firm. Comiskey & Company, P.C. is a full-service CPA firm specializing in taxation, accounting and auditing for construction, agriculture, SEC, and other industries. For more information, please call (303) 830-2255, visit http://www.comiskey.com, or follow them on Facebook. The office is located at 7900 East Union Avenue, Suite 150, Denver, CO 80237.
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