As 2016 draws to a close, there is still time to reduce your 2016 tax bill and plan ahead for 2017. We’ve compiled a list of tax-saving opportunities and wanted to share them with you now. The full article can be viewed here – 2016 Tax Planning Considerations for Individuals.
Here are some highlights:
- Annual Gift Tax Exclusion: The most commonly used method for tax-free giving is the annual gift tax exclusion, which, for 2016, allows a person to give up to $14,000 to each donee without reducing the giver’s estate and lifetime gift tax exclusion amount.
- Traditional IRAs: The annual deductible contribution limit for an IRA for 2016 is $5,500. For 2016, a $1,000 “catch-up” contribution is allowed for taxpayers age 50 or older by the close of the taxable year, making the total limit $6,500 for these individuals.
- Deduction in Year Paid: An expense is only deductible in the year in which it is actually paid. Under this rule, if your tax rate is going to increase in 2017, it is a smart strategy to postpone spending until after year end to take the deduction in 2017.
- Charitable Contributions: Consider making your charitable contributions at the end of the year. This will give you use of the money during the year and simultaneously permit you to claim a deduction for that year. You can use a credit card to charge donations in 2016 even though you will not pay the bill until 2017.
- Investment planning: The following rules apply for most capital asset transactions in 2016:
- Capital gains on property held one year or less are taxed at an individual’s ordinary income tax rate.
- Capital gains on property held for more than one year are taxed at a maximum rate of 20% (0% if an individual is in the 10% or 15% marginal tax bracket; 15% for individuals in the 25%, 28%, 33% and 35% brackets).
You can read the entire article here. We would be happy to meet with you at your convenience to discuss the strategies outlined above. While we are getting very close to the end of the year, there is still time to implement these strategies to minimize your 2016 tax liability.
Written by Andy Johnson