Conduct an initial review in 2016 while there’s still time to make changes.
Our Bach, James, Mansour & Company team just recovered from the final 2015 tax filing deadline on October 17th. That means it’s time to kick 2016 tax planning into high gear! Some of our more proactive clients have already scheduled their tax planning meetings. It’s time to schedule yours.
The goal of these meetings is to review your personal and business financials while there is still time to make 2016 adjustments that may put you in a better tax situation. Waiting until 2017 is too late in most cases, so please give us a call now to schedule your tax planning meeting by the end of November.
Navigating the PATH toward lower taxes
The Protecting Americans from Tax Hikes Act of 2015 (PATH) permanently extended a number of individual and business tax incentives that, before the Act, were extended from year to year. This removed a lot of the year-end speculation on whether Congress would re-extend the tax breaks, but not all of them were extended past 2016.
Here is some detail on some of the tax breaks more commonly used by our clients. Please note that these are highly simplified explanations. Many have additional criteria, restrictions, and limitations that we will review during your tax planning meeting.
- Teacher’s classroom deduction. The (up to) $250 deduction for classroom expenses and professional development is a big deal for teachers.
- Research credit. Simply put, this is a tax credit for increasing a company’s research activities.
- Small business tax gains exclusion. Allows non-corporate shareholders to exclude the gain from the sale of qualified small business stock.
- Section 179 deduction. This allows a deduction of up to $500,000 for qualifying 2016 equipment and software purchases.
- Bonus depreciation. This is being phased down through 2019, but you can still take a 50% first-year deduction on the purchase of qualified business property.
- 15-year recovery for leasehold improvements. Faster depreciation (15 years vs. 39) for qualified improvement property after bonus depreciation (mentioned above) is utilized.
Expiring in 2016 (although Congress still might extend)
- Mortgage insurance premium deduction. You can deduct the cost of mortgage insurance, often required for loans with lower down payments, the same way as mortgage interest expense.
- Secondary school tuition and fees deduction. Up to $4,000 deduction for college or vocational school education expenses, including tuition and room and board.
- Mortgage debt exclusion. This helps people negotiate their way out of underwater mortgages without having the debt forgiveness (up to $2 million) taxed as income.
Schedule your planning meeting now. Don’t wait until April 2017
It’s not that we’re lonely. By reviewing your finances before year-end, we might be able to make adjustments now that will put you in a better situation. Sometimes, funding retirement plans, adding charitable contributions, or pre-paying expenses can also make a big difference. You can even pay those deductible expenses by credit card in 2016, and then pay off your card in 2017. Last year, one client was able to save about $2,000 in taxes by funding an additional $5,000 to his retirement account.
We’re not just tax advisors
While we’re meeting, we can also review your investment mix, retirement savings, insurance, and overall financial health. Bach, James, Mansour & Company does not sell investment or insurance products, so we’re an unbiased source of advice. Please contact us to schedule your November planning meeting. Proactively helping our clients is the most enjoyable thing we do.
Neal Bach, CPA