As the end of the year approaches, it is a good time to
think of planning moves that will help lower your tax bill
for this year and possibly the next.
Factors that compound the planning challenge this year include political and economic uncertainty, and Congress’s all too familiar failure to act on a number of important tax breaks that will expire at the end of 2016.
Some of these expiring tax breaks will likely be extended, but perhaps not all, and as in the past, Congress may not decide the fate of these tax breaks until the very end of 2016 (or later). For individuals, these breaks include: the exclusion of income on the discharge of indebtedness on a principal residence, the treatment of mortgage insurance premiums as deductible qualified residence interest, the 7.5% of adjusted gross income floor beneath medical expense deductions for taxpayers age 65 or older, and the deduction for qualified tuition and related expenses.
There is also a host of expiring energy provisions, including among them: the nonbusiness energy property credit, the residential energy property credit, the qualified fuel cell motor vehicle credit, the alternative fuel vehicle refueling property credit, the credit for 2-wheeled plugin electric vehicles, the new energy efficient homes credit, and the hybrid solar lighting system property credit.
For 2016, the top tax rate of 39.6 percent will apply to incomes over $415,050 (single), $466,950 (married filing jointly and surviving spouse), $233,475 (married filing separately), and $441,000 (heads of households). Higherincome earners have unique concerns to address when mapping out year-end plans. They must be wary of the 3.8% surtax on certain unearned income and the additional 0.9% Medicare (hospital insurance, or HI) tax. Please see the enclosed detailed article outlining the details of these taxes.
We have compiled a tax saving moves based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you (or a family member) will likely benefit from many of them. Please review the enclosed list and contact us at your earliest convenience to discuss further.